Rental markets remain sluggish across three boroughs
S. Jhoanna Robledo
In February, we wrote about how renters should negotiate with landlords, considering the rise of concessions. The latest market reports indicate that even with the approach of spring—which usually means the market is poised to pick up its pace—there's still plenty of promising news for renters in Manhattan, Brooklyn, and northwest Queens.
Douglas Elliman's February market reports reveal a continued renter-friendly market. While landlord concessions declined slightly in Manhattan from last month (from 30.9 to 26.4 percent of new leases), that amount is still the second-highest on record. Moreover, median rents across all size categories—from studios to three-bedrooms—decreased compared to this time last year; the median rent for all Manhattan apartments is now $3,350, down from $3,382 in February 2016.
As is the case with sales in Manhattan, the market is softest at the top, due to a spate of luxury new developments opening up. That said, there's some room to negotiate on less high-end properties, too. "The mantra I've been espousing over the last year, that the rental market is softer at the top, is still true. However, all segments are seeing varying degrees of weakness because of oversupply. It's soft at the entry level, too, just not as soft," says Elliman report author and appraiser Jonathan Miller.
It's no surprise, then, that the vacancy rate has also climbed, from 2.31 percent in February 2016 to 2.44 percent now. Citi Habitats' February report also reflects a sluggishness in Manhattan, and the firm's neighborhood breakdown shows that the vacancy rate is highest in the West Village (2.5 percent). Chelsea also has plenty of vacancies, with a rate of 2.2 percent, while Murray Hill is comparatively stronger, with a 1.57 percent rate.
Gary Malin, president of Citi Habitats, explains that most times, this relates to price. "Prices in these neighborhoods have escalated substantially over time, but in many instances, the apartments are very small," he says. "In the past, clients overlooked size, but the market has shifted and people are saying to themselves, 'I can spend this amount and get a much larger apartment—do I really need to live in the heart of the West Village?' People are looking to find more value."
He adds that innovations in transit—like ride- and bike-sharing services—have made it easier for New Yorkers to head further afield: "Different transit options pushed them out into neighborhoods they wouldnt have gone to before," he says.
And while last quarter's sales reports showed strong sales in the outer boroughs, Brooklyn's rental market mirrors that of Manhattan, with overall median prices down slightly from last year ($2,787 to $2,750), as well as across all apartment sizes. A little udner 16 percent of new leases come with concessions—think a free month (or two) of rent, waived broker's fees, or your overall rent knocked down a notch—and that's up from 12.9 percent in 2016. "Manhattan started to show softness in early 2016. Brooklyn was late to the party, but caught up quickly," Miller says.
Northwest Queens, too, is seeing a slowdown, with the overall median rent falling for the third time in four months to $2,800 per month; inventory grew for the 18th consecutive month. Miller explains that in this area, one-third of all rental transactions are at new developments, so the numbers depend heavily on what's coming on the market.
"Two of the categories [studios and three-bedrooms] showed declines, but that market has already shown across-the-board declines as well," Miller says. "Concessions there are on par with Manhattan, if not a little bit higher."
Malin notes that this has come as a bit of a surprise to some Queens landlords, as historically these kinds of changes to markets in Manhattan and Brooklyn don't filter down to them. "But Queens is still doing very well," he adds. "Owners are ecstatic about prices now compared to five years ago."
And while the perceived wisdom is that real estate markets heat up along with temperatures, Miller says we can expect median rents to continue to trend slightly downward; supply will remain high as new developments keep opening.
But even with the discounts, rents are still quite expensive. So much so, in fact, that many New Yorkers are packing it in and making for the suburbs, leaving more rental units empty.
"What we've been seeing for about 18 months is record sales volume in the outlying suburbs. The demand is coming from rental markets where people are priced out or are ready to be first-time buyers, and want to do it now," Miller explains. "New product coming into the markets is skewed to the high end. As a result, if you look back over the past five years, there's much more price growth at the entry level. We're hitting the affordability threshold."
This means the time may be right for New Yorkers who intend to stick around to sharpen their negotiating skills: With landlords increasingly eager to offload their inventory, you may be able to shave a month or two of rent off a new lease.
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