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Rental concessions keep rising, with records set across the city

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Concessions now account for about half of the market share

By Tim Caynes/Flickr Creative Commons

The January market reports are out, and it looks like the New York City rental market is kicking off the new year much like it spent the last one. “The prevailing theme across the board was the record number of market-share concessions set,” says Jonathan Miller, author of Douglas Elliman's report.

Rental concessions from landlords are at an all-time high in Manhattan, Brooklyn and Queens. In Manhattan, the share of new leases signed with some kind of concession was a whopping 49.3 percent, up from 30.9 percent. In Brooklyn that share was 47.5 percent, up from 18.1 percent. And in Queens, the share came in at a whopping 50.8 percent, up from 38.5 percent.

“What we've been seeing over the last four months is an acceleration of concessions,” says Miller. But that gambit is working, in the sense that Manhattan's vacancy rate has been steadily declining; it went from 2.35 percent to 1.98 percent for January.

In Manhattan, the median rental price fell 2.8 percent to $3,275 and the net effective rent—which takes into account concessions—declined 3.6 percent to $3,141. (That drop in the net effective rent is the largest annual decline in more than six years.) The size of concession was 1.4 months of free rent or equivalent, up from 1.3 months the prior month.But the average rental price was up, mainly because of high-end apartments entering the market, Miller says.

Over in Brooklyn, the median rental price was unchanged at $2,750, but the net effective rent declined 2.4 percent to $2,636. The size of concession was 1.5 months of free rent or equivalent, down from 1.6 months. Miller also found that the number of new leases surged—42.1 percent, in fact—as new development entered Brooklyn's market at a rapid pace. All those new leases reflect both the new development units and tenant pushback at their lease renewal.

Finally, in Queens, January marked the fourth time the concession market share reached a new record high. The median rental price was $2,650, down 1.9 percent, and the net effective rent declined 4.7 percent to $2,507. (That's the fifth year-over-year decline in net effective rent in six months.) The size of concession was 1.8 months, up from 1.1 months.

The Queens market also saw lots of action, with the number of new leases surging 43.2 percent; 30 percent of the market share in the borough is from new developments.

Citi Habitats, which also released its January rental report, decided that “the city’s rental market is stuck in neutral.” Gary Malin, president of the firm, explains: Month-to-month, we will see a little movement up or down, put pricing has stayed within the same bandwidth. We found that overall, rents fell slightly from December—and any drop in pricing is a positive sign for tenants. Meanwhile, concessions remained prevalent, especially for homes at the higher end of the price spectrum.”

More than 40 percent of rental transactions brokered by Citi Habitats offered a free month’s rent and/or payment of the broker fee to entice new tenants in January, up from 41 percent in December. “These incentives remain remarkably high,” the firm notes, and they're being offered on both new construction units and re-rentals.

The most expensive Manhattan neighborhood for renters last month SoHo/TriBeCa, with a median rent of $5,400. Manhattan rents were lowest in Washington Heights, with a median rent of $2,225. For Brooklyn, DUMBO was most expensive neighborhood with a median rent of $4,200, followed by Williamsburg at $3,250 per month. Crown Heights and Bedford-Stuyvesant, both with a median January rent of $2,400, were the least expensive Brooklyn neighborhoods tracked in Citi's report.