New report: Buyers are starting to 'camp out' in the NYC rental market
If you’re looking for a rental apartment in Manhattan, you’re going to have some more company than you would expect.
There’s demand for rentals coming from some buyers who are now opting to put their purchases on hold and “camp out” in the rental market.
That’s one of the trends impacting Manhattan rentals—in the short-term, at least—according to Douglas Elliman’s report for Manhattan, Brooklyn, and Queens for November. The report also found that concessions for all three areas are continuing their upward trend, while vacancy rates are dropping. Prices are being pulled higher because of an influx of new development.
“There’s a lot of uncertainty in the sales market, where sales have fallen for consecutive quarters, so you are starting to see the people try to time the market," says Jonathan Miller, president of the appraisal firm Miller Samuel and author of the report. There’s significant oversupply in the rental market, so while these buyers will boost demand, it still may not hurt your chances at getting the apartment you want, at least not for now.
You should also know that the median rent for Manhattan apartments slipped 1.3 percent year over year to $3,318. The percentage of new leases that come with no fee or free months was 42.2 percent, and coincidentally, this was also the 42nd month with an increase in the number of leases with some kind of concession, a pattern that Miller called “astounding.”
You’re more likely to find a concession in new development. In Brooklyn, eight out of 10 new development rentals had a landlord concession (landlords prefer to give concessions rather than breaks on rent because they want to entice you into paying a higher rent). Brooklyn saw its market share of concession increase year over year for the 34th consecutive month, while the median rental price was up 2 percent to $2,850.
Rents are rising because new development is skewing prices, as opposed to landlords raising rents, a phenomenon that has been going on for six months now. “We’ve hit critical mass” in new development, Miller says.
The indicator to watch is the prevalence of concessions, which he says are hard to take away when there is a lot of inventory. But eventually they will no longer be offered, and one of the most interesting places to watch will be neighborhoods within commuting distance of Long Island City, the future home of Amazon’s HQ2.
Miller asserts that HQ2 has not had an impact on rentals there, despite reports of brokers leasing apartments sight-unseen or via text, reports which he says are “not real.”
“If that were true we would be reading about it every day, not just the day after the announcement,” he says.
In Queens, the share of new leases with some kind of concession was 59.2 percent, up from 44.5 percent. And 80.8 percent of new development leases had a concession.
Miller thinks that with 11,000 new apartments for LIC in the pipeline, and more luxury residential complexes to come, face rents are going to skew higher, and concessions will “melt” away.
He pointed to the salary of $150,000 projected for the new Amazon employees. “That’s right in line with $3,000-plus a month rentals,” he says.
In Queens, the median rental price was $2,868, up 10.3 percent, for November.
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