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NYC rental market’s ‘slow grind’ keeps prices down

As long as luxury inventory stays high, prices are likely to continue dropping

Manhattan’s median rent fell nearly 3 percent from the same time last year.
Max Touhey

The story of New York City’s rental market remained the same at the beginning of the summer: Prices continue to inch downward—though not to a level of what one might call “affordable”—and concessions remain prevalent across the boroughs. Jonathan Miller, the author of the Douglas Elliman reports, calls it “the slow grind”—as long as there’s a hefty supply of luxury inventory, price drops will likely continue, and incentives will remain high.

According to Miller, “we’ve cracked the three year mark” when it comes to new leases in Manhattan with some form of rental incentive; for the 37th consecutive month, there was a year-over-year rise in the number of transactions with concessions, from 24 percent last year to 32.6 percent this year.

That number was actually higher in Brooklyn and Queens; 40.4 and 45.7 percent of new leases came with a concession, respectively.

But there is “one interesting wrinkle” in last month’s numbers, according to Miller: New leases are down across the three boroughs. In Manhattan, the number of new leases declined 17.5 percent to 5,447. In Queens, that number declined 13.7 percent to 302. Brooklyn saw a drop of 17.7 percent to 1,413. But it doesn’t point to a drop in inventory; instead, Miller believes “landlords have become better at wooing tenants into renewal,” meaning more negotiations and continued concessions past year one of the lease.

In terms of hard numbers, prices have dropped ever-so-slightly, but rents are still quite high: In Manhattan, the median rental price fell 2.9 percent from last year to $3,400 this June. The face rent for most types of apartments is also down from a year ago: The median studio pricing remained the same at $2,600; one bedrooms fell from $3,500 to $3,400; two bedrooms dropped from $4,312 to $4,150; and three bedrooms went from $5,620 to $5,614.

The median net effective rent (which factors in concessions) declined 2.8 percent, from $3,410 to $3,314. That number has declined year-over-year for the sixth time in seven months, according to Miller.

In Brooklyn, the median rental price for June came in at $2,850, unchanged from a year ago. Factoring in concessions, that number declined 2.2 percent, from $2,813 to $2,751.

In Northwest Queens, new development still dominates—nearly one third of rental activity came from new development projects last month, according to the Elliman report. But the borough isn’t immune to concessions, either. June marked the 16th consecutive month with an annual rise in the concessions market share.

Queens’ median rental price came in at $2,850, down 1.8 percent. The net effective median rent declined 2.7 percent to $2,745, making this the seventh consecutive year-over-year decline in net effective rent. As for concessions, the share of new transactions with concessions came in at 45.7 percent, up from 38.3 percent. The size of concession was 1.4 months, up from 1.2 months.

Citi Habitats took a look at the full second quarter of the year and found “landlords were bullish on the summer season due to a streak of six consecutive months of increased market demand,” according to Gary Malin, Citi’s president. The firm found that students, both international and domestic, as well as would-be buyers playing wait-and-see regarding a home purchase (given changes in the tax laws under Trump), are among the key drivers of the rise in traffic.

Looking at June rents, Citi Habitats found, prices fell 1 percent year-over-year for studios, while rents were up by percent, 2 percent and 3 percent for one-, two- and three-bedroom apartments. In Brooklyn, when compared to last year, June rents for studios were up 5 percent. For one bedrooms, pricing was up 2 percent. The firm tracked a minimal increase in two bedroom rents, while rents for three-bedroom homes went down by 1 percent.

Finally, Citi tracked a 27 percent climb of leases that included a move-in incentive, from 19 percent in May. As the firm puts it, “they continue to be a significant marketing tool in both new developments and existing properties alike.”