NYC renters are ‘paying more for smaller apartments’
- The average rent per square foot for Manhattan apartments leased in July was the second-highest on record
- And the average size of a new Manhattan rental fell for the 11th time this year according to the Elliman Report
There are signs that rents are peaking as inventory continues to rise and bidding wars are involved in fewer new leases.
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Most New York City renters don’t compare rent per square foot when hunting for new apartments because it’s hard to know what’s typical for a rental here.
So it may come as a bit of a surprise that the average rent per square foot for Manhattan apartments leased in July was the second-highest on record ($85.03), and at the same time, the average size of a newly leased rental fell for the 11th time this year, according to the latest version of the Elliman Report. It was a similar story for Brooklyn and Queens rentals.
In a nutshell, renters are “effectively paying more for smaller apartments,” said Jonathan Miller, president and CEO of appraisal firm Miller Samuel and author of the report.
It’s not much relief to renters, but median rents have been slipping for the past several months (average rents are skewed by outliers, like ultra luxury apartments). Manhattan’s median rent in July, $4,300, dropped 2.3 percent from a year ago—making it only $100 less than that all-time record. Median rent was also unchanged from June.
Lease signings were up 54.3 percent compared to July 2023, as listings increased 44.1 percent.
Miller said there are signs that rents are peaking as inventory continues to rise and bidding wars are involved in fewer new leases. They still account for about 21 percent of new leases as opposed to 24 percent last month.
With an interest rate cuts on the horizon, some pressure will be removed from the NYC rental market as renters who have been putting off buying seek financing to finally make their move. In fact, mortgage rates are already declining even though the Federal Reserve hasn’t cut interest rates.
Gravitating to pre-pandemic square footage
Apartments are not really shrinking in size, nor are renters squeezing into a one bedroom instead of two. Instead, it’s a return to normal with renters gravitating to pre-pandemic apartment square footage, Miller explained.
What occurred in the NYC rental market coming out of the pandemic was the anomaly, not what is taking place now. Back then, average square footage for new leases increased as renters scored deals and found they could stretch their budgets for larger apartments.
Now, the average square footage for new leases is settling back down. The average square footage for a Manhattan apartment leased last month was 945, down 9.5 percent from a year ago, when it was 1,034. So apartments are smaller but not by a dramatic amount. That’s more apparent when you look at the decade average, Miller said. The average square footage for an apartment leased in July over the past 10 years was 931—so newly leased apartments are not drastically smaller.
But there is another factor limiting apartment size: Average apartment sizes are being skewed by new development rentals, which are generally smaller than existing rentals. The impact was most pronounced in Manhattan, where the average square footage for new development rentals leased in July was 992, a 25.8 percent drop year over year.
A game of musical chairs
Why were there so many new listings in July? It has to do with expiring leases, according to Gary Mallin, COO at Corcoran, which also released July rental market reports for Manhattan and Brooklyn.
Malin explained that “some landlords structure existing leases to expire during the season to take advantage of increased demand.”
The increase in listings also meant apartment seekers “had more options from which to choose,” he said.
Brooklyn lease signings surge
In Brooklyn, new lease signing surged to 4,477, the highest on record last month, increasing 300.8 percent over July 2023, when 1,117 renters signed new leases. New listings increased 92.9 percent to the second-highest level for July, according to the Elliman Report.
Median rent in Brooklyn declined 9 percent year over year to $3,563 as the average size of a rental fell for the 10th month and the average rent per square foot increased 2 percent to $56.71.
The average square footage for a Brooklyn rental leased in July was 969, down 7.3 percent year over year, the report said.
New development averaged 831 square feet, and existing rentals averaged 985 square feet.
New listings jump in Queens
In the northwest Queens region covered by the report, the number of new leases signings leaped to 945, also the highest level on record, increasing 419.2 percent over July 2023, when 182 renters signed new leases. Listings were at the second-highest level for July, increasing 179.8 percent.
Median rent fell year over year by 5.2 percent to $3,450 and the average size of a rental declined for the first time in four months. Average rent per square foot increased 1.2 percent to $56.07.
The average square footage for a July rental in Queens was 811, down 14.5 percent year over year. New development average square footage was 725, compared to 825 for existing rentals.
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