Renters can take comfort that concessions are now the norm in the New York City market—and even better, prices are on the slow decline. The latest match of rental reports show that the market “continues to be mismatched,” as numbers guru Jonathan Miller puts it, with increasing inventory for luxury units and pent-up demand for more affordable places to live.
In Manhattan, prices are down across the board: This past month saw the largest year-over-year decline in net effective rent tracked in six-and-a-half years, the fourth consecutive monthly year-over-year decline in median face rent, and the third highest recorded landlord concession market share in seven-and-a-half years.
“Despite record concessions, we’re seeing the face rent sliding too,” says Miller, the author of Douglas Elliman’s report. “It means the concessions have kept the rate of [price] decline somewhat in check, but have not stopped it.”
Manhattan’s median rent fell 3.2 percent from a year ago, to $3,290, while the average rent decreased 2.9 percent to $4,089. The net effective rent, which takes concessions into account, declined 3.8 percent to $3,168.
The share of new rental transactions concessions in Manhattan was 41.7 percent, up from 28.4 percent a year ago. And the size of concession was 1.5 months of free rent or equivalent, up from 1.3 months. In Brooklyn, concessions are also being offered for roughly half of all rentals, and the size of concession was 1.5 months of free rent or equivalent.
Rents are falling in Brooklyn, too—March marked the fourth consecutive decline in the year-over-year net effective median rent, which dropped 6.3 percent to $2,629. Not taking concessions into account, the median rent fell 3.4 percent to $2,750 and the average rent slipped 1.4 percent to $3,109. According to Douglas Elliman’s report, two-bedrooms were only category with rise in median face rent and market share.
Finally, Northwest Queens hit a new record for landlord concessions. “The most mind-blowing numbers are in Queens,” Miller says, with the share of new rental transactions with concessions at a whopping 63.3 percent, up from 42.7 percent. The size of concession was 1.8 months, up from 0.9 months.
This was the fourth consecutive month with year-over-year decline in net effective rent, while the existing median rent stabilized as new development median rent slid. Median rent was $2,750, down 1.8 percent, and net effective rent declined declined 6.4 percent to $2,559.
As long as the rental market is flooded with luxury apartments, you can count on rental concessions being the norm, Miller says. “If we see a shift, with more middle-of-the-road and entry pricing, that discussion changes. But there’s no evidence of that in the near term.”
At the end of the day, however, there remains plenty of demand for housing. “With the vacancy rate falling to the lowest level in 10 months, there is increased demand for rental housing in New York,” Gary Malin, president of Citi Habitats, says in the firm’s March report. But he notes that “tenants remain price-sensitive, so landlord incentives remain in play—especially in the luxury segment—to create a sense of value in the marketplace.”
In March, Citi Habitats found that year-over-year, Manhattan pricing fell by one percent and four percent for studio and two-bedroom apartments, while rents were up two percent and one percent for one- and three-bedrooms. Year-over-year in Brooklyn, rents declined slightly across the board. Rents for studio units fell two percent, while they were down one percent for one-bedroom homes. Two- and three-bedroom rents both fell 3 percent when compared to last year.
The Manhattan vacancy rate has fallen to 1.77 percent over the first quarter, from 2.16 percent in the fourth quarter of 2017. It’s also lower than 2017’s first quarter rate of 1.93 percent. The result? Fewer available apartment choices for potential tenants.