Manhattan’s peak leasing season flattened by July rent declines
Leasing costs in the borough dropped 1.9pc from July 2016, the first decline for the month in at least five years
For Manhattan landlords, Christmas usually comes in July, a month when demand for apartments surges and rents go up. Not this year.
Leasing costs in the borough dropped 1.9 per cent from July 2016, the first decline for the month in at least five years, according to a report by appraiser Miller Samuel and brokerage Douglas Elliman Real Estate. The median net effective rent, or what tenants paid after concessions are factored in, was US$3,350.
July is typically the pinnacle of Manhattan’s busiest apartment-leasing season, when recent college graduates and families take residence in the city, and landlords capitalise on demand by holding firm on – or increasing – prices.
But as the market contends with an unrelenting wave of new supply, owners are using the summer as way to get ahead of the competition. They’re offering rent discounts and deal sweeteners in a rush to fill their units before the slower, cooler months set in.
“The last thing anyone wants to do, especially now, is rack up vacancies,” said Gary Malin, president of brokerage Citi Habitats, which released its own report on the rental market Thursday.
“If you rack them up now, going into a slower time, its going to be even harder to achieve your price.”
Manhattan landlords offered incentives such as a free month’s rent or payment of brokers’ fees on 27 per cent of all leases signed last month, up from 11 per cent a year earlier, Miller Samuel and Douglas Elliman said.
Those enticements came on top of discounts averaging 2.3 per cent off the asking price.
The lures seemed to work. The number of new leases rose 3.4 per cent to 6,133 as many tenants shopped around for the best deals, the firms said.
The number of apartments available at the end of July slipped 1.8 per cent to 7,545 listings – but that’s still 33 per cent more than the 10-year monthly average, which is 5,670.
More are coming. About 5,500 newly built units, most of them high-end, will be added to Manhattan’s market-rate rental inventory this year, Citi Habitats said in May.
“We’re advising our landlords and owners to really be aware of the inventory and how much is on the market and to be priced aggressively to move,” said Hal Gavzie, Douglas Elliman’s executive director of leasing.
Douglas Elliman broker Kristina Paces gave that advice to clients who last month were trying to rent out their one-bedroom apartment on the Upper East Side.
The owners wanted to list the 835-square-foot (78-square-meter) unit at US$3,500. Paces saw there were 24 other one-bedroom listings, at similar prices, in the same four-tower complex, and advised them against it.
“I said, ‘No way,’” Paces recalled in an interview. “We’re going to be in trouble if you want to list it at that. We have to do something different.”
On July 5, she listed the unit for US$3,295, and found a renter in less than two weeks.
On the Upper East Side, the median rent in July was US$3,200, down 4.5 per cent from a year earlier, Citi Habitats said in its report. On the Upper West Side, rents slid 4.1 per cent to US$3,600.
In the Soho and Tribeca neighborhoods, the most expensive in the borough, monthly costs fell 5 per cent to a median of US$5,995, the firm said.
Landlords are “very much aware of what their competitors are doing,” Malin said. “They understand that for a lot of tenants, it really does come down to price more than anything else.”