The New York renter's year of concessions may finally be changing course, as landlords realize they can't solely depend on concessions to bring tenants into higher-priced buildings. According to the latest market reports, rent is still soft and we're starting to see that "landlords aren't raising their use of concessions, but are starting to set prices less aggressively," according to Jonathan Miller, author of the Douglas Elliman reports.
The best case of this is in Brooklyn, which is softer than the Queens and Manhattan rental markets, according to Miller. The net effective median rent--which factors in concessions, and comes in at $2,813/month—declined annually for the ninth month of the past 12. At the same time, listing inventory expanded year-over-year for the 22nd consecutive month.
It's not that the use of concessions fell dramatically, Miller points out. The share of new rental transactions with concessions was 17.1 percent, up from 6.2 percent a year ago. The size of concessions offered was equal to 1.3 months of free rent or equivalent, down from 1.5 months. But trends have shown the use of concessions decreasing since they peaked in January, Miller says.
Renters are responding to the monthly perks. Due to the availability of new development units, and tenant pushback at lease renewal, the number of new leases jumped a whopping 61.5 percent from last year.
But Miller sees Brooklyn's flat pricing (the median rent, without concessions, declined one percent to $2,850) as indicative that landlords are becoming open to lowering rents, at least a little. "We're seeing that the sky's not the limit when it comes to offering concessions," he says.
It's a similar story in Manhattan, where the median net effective rent of $3,410 remained essentially flat as new leases jumped 26.9 percent. The share of the market with concessions was 23.9 percent, up from 9.7 percent last year, but that's still lower than when the number peaked in January. Concessions are also doing their job, as the vacancy rate fell to 2.21 percent from 2.3 percent last year.
Unsurprisingly, affordable apartments are outperforming the luxury ones, with the luxury median rent declining 0.6 percent to $7,949. Miller calls the luxury inventory the weakest segment of Manhattan's rental market.
In Queens, "concessions are much higher due to the heavy volume of new development," Miller says. The share of new rental transactions with concessions was 38.3 percent, up from 9.4 percent, though the size of concession was 1.2 months down from 1.5 months. And the new development market share was 34.6 percent, up from 28.2 percent.
Queens's median rental price was $2,903, up 4.2 percent from a year ago, and the median net effective rent rose 2.5 percent to $2,822. That bump in pricing is also due to development, which exceeded one third of all rental activity.
Citi Habitats’s report found that summer rents have bucked the historic trend of a market that tightens as summer progresses. A full 28 percent of new tenants received some form of incentive from the landlord (up from 22 percent in May), according to the brokerage firm. And the percentage of leases signed with Citi Habitats that include a move-in incentive has topped 20 percent since September of 2016, and has been higher than 10 percent from October 2015 onwards.
The firm found that when compared to June of 2016, rents in Manhattan increased one percent on average for studio, one- and three-bedroom homes. For two-bedroom units, prices decreased an average of three percent. Despite the stagnant numbers, Citi Habitats—which has tracked rents across the borough since 2002—reports that rents continue to hover near all-time highs, despite the lack of recent growth.
MNS also released rental reports and found that the largest monthly rent increase in Manhattan was in the Lower East Side, where rents are up 12.9 percent from $3,078 to $3,475 in June 2017. The largest decrease was in SoHo, where doorman two-bedroom units are down 5.6 percent since last month from $8,449 to $7,973.
In Brooklyn, the largest monthly increase was for studios in Dumbo, up 8.3 percent from $3,010 to $3,259. The biggest decrease was for studios in Clinton Hill, down six percent from $2,126 to $1,999.
- Manhattan, Brooklyn and Queens Rentals [Douglas Elliman]
- Citi Habitats Real Estate Market Reports [Citi Habitats]
- MNS Rental Reports [MNS]
- What happens to New York apartment-seekers when perks like free rent dry up? [Curbed]