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Manhattan rents keep rising, but there’s some hope in Brooklyn

Inventory keeps rising, along with Manhattan median rents, but Brooklyn prices saw an incremental drop

The latest round of rental market reports are out, with numbers showing that the market for luxury rentals is slowing down—not unlike the much-publicized slowdown in the luxury condo market. As for everything that isn’t luxury real estate, of course, demand remains steady.

Douglas Elliman examined rents for the month of July and recorded a median rent of $3,450/month in Manhattan (0.2 percent higher than the previous month), a median rent of $2,826/month in Brooklyn (1.9 percent lower than the previous month), and finally a median of $2,768/month in Queens (a .7 percent drop from June). These slight changes are following a trend: "For most of 2016, median rent has been slightly up or down compared to the year ago period," explains Miller. That means you shouldn’t get too excited about the drop in Brooklyn and Queens rents—Miller thinks that pricing is "unlikely to weaken significantly from here."

Taking a look at Manhattan, that median rental price of $3,450 marks the second highest price recorded in eight years. Median rents for studios were $2,616, which is 2.6 percent higher than last year. The median for one bedrooms was $3,450, 2.3 percent higher than a year ago, and for two bedrooms at $4,250, a 2.1 percent increase. The only type of Manhattan apartment that saw a drop in median price was three bedrooms, from $7,336 in July 2015 to $7,124 this July. In fact, the report notes there have been weaker price trends in larger apartments as the luxury median rent slipped.

About that luxury rental market: A ton of ultra-luxury apartments have come to the market this summer, with the result being that listing inventory in Manhattan jumped to its highest level in more than seven years, while the vacancy rate was the highest July recorded in nine years. Miller explains that it’s "largely because the growth of inventory is from higher-end, whereas inventory in lower segments is tighter because supply is static despite growing demand." An example of this, says Miller, is that non-doormen rents grew faster for July than doorman rents.

There's some hope in Brooklyn, though: the overall median rent declined for the first time in 2016. (Nevermind the fact that it's still higher than it was this time last year.…) Plus, the "share of rentals with landlord concessions more than doubled last year’s share"—meaning landlords are offering more benefits for renters, like a month of free rent and the like. Listing inventory rose a whopping 29.6 percent to 2,424—its highest level recorded in more than seven years. All this new supply, as well as tenants resisting lease renewals, made the number of new leases surge this summer.

Queens is more of a mixed bag, Miller explains. "Nearly a third of all rentals in Northwest Queens are from new development, so it depends on the mix entering the market any given month," he says. "As a result, prices are very choppy month to month, but in a macro view, rents have remained fairly stable." He notes that there’s been so much new rental supply (the new development market share increased from 21.4 percent last year to 29.9 percent) that it’s kept prices from rising dramatically over the long run. Rents in the luxury market fell more than the overall market, from $4,650 a year ago to $4,418. And although the listing inventory has jumped 15.1 percent, the marketing time is faster than a year ago—36 days, down from 42.

Citi Habitats also released its Manhattan rental report for July and found that in compared to June, rents decreased slightly across the board. "The biggest decline," according to the report, "was for one-bedroom homes, where rents fell 3 percent month-over-month."

Citi Habitats also notes the high vacancy rates this summer, which they say rose from 1.7 percent in June to 1.92 percent in July. It’s the highest vacancy rate they’ve seen since tracking the rental market in 2002. 19 percent of transactions in July came with a landlord concession, which Citi Habitats reports is unusual for the summer ‘busy’ season. (In July 2015, for example, 8 percent of leases offered a move-in incentive.)

Here’s what Gary Malin, the president of Citi Habitats, has to say about the numbers:

"The fact we are trending towards a two percent vacancy rate despite the busy summer season shows we are in a very price sensitive market. The use of concessions and slight rent adjustments by owners has failed to significantly move the needle. Today’s renters are increasingly open to living in the outer boroughs or New Jersey. In order to reverse this trend, Manhattan landlords will either have to become more liberal with their incentives – or adjust their pricing to reflect the changing conditions."

The report also notes that for July, the priciest neighborhood for renters was SoHo/TriBeCa, with a median rent of $6,310, then Gramercy/Flatiron came in second with a median rent of $4,595. Washington Heights was cheapest, with a median rent of $2,200.