Frans Preidel of Brown Harris Stevens at One Beacon Court, where he recently rented an apartment for $65,000 per month after a bidding war.
When Miron Properties’ Jeffrey Schleider signed on in April to market a two-bedroom Lincoln Square penthouse, he never thought the property would inspire a bidding war. With an asking rent of $15,000 per month, the unit is “pretty expensive,” compared to most New York apartments, Schleider said, and he suspected it would appeal to a very small group of wealthy renters.
So he was surprised to receive no less than three competing offers on the property, all close to the asking price. Schleider asked each of the would-be renters to submit second bids, and then asked for each party’s best and final offer. The apartment eventually rented for the asking price, with the winning bidder agreeing to pay a portion of the rent up front.
Schleider’s experience is far from unique. With the rental market booming, brokers say, the competition for high-end rental apartments is heating up, prompting a growing number of bidding wars.
Bidding wars are less common among rentals than sales, in part because asking rents are far more flexible than sales prices. And while rental bidding wars occasionally appeared in the hot pre-financial-crisis market, they were virtually nonexistent during the recession.
Lately, however, they’re making a comeback, brokers said. That’s especially true for high-end rentals, a market so competitive that tenants often end up paying more than the asking rent.
“I’ve been doing this since 1998, and rarely have I seen a rental bid up further than the asking price,” said Citi Habitats’ Nathaniel Faust. Now, however, “there’s a lot of frustration from renters who are losing out on apartments, so they’re willing to pay above-ask to make sure their search is over.”
The increased competition is allowing landlords to be selective about the tenants they accept, to the chagrin of wealthy would-be renters, who often respond by offering a year of rent up front or attempting to show landlords that they are desirable renters.
Faust, for example, recently listed a rental at 343 West 16th Street for $7,000 per month — up significantly from the previous tenant’s monthly rent of $6,125. Still, the listing drew three competing bidders, two of whom offered more than the asking price. Eventually, he said, the unit rented for $7,500 per month, with a year’s rent paid in advance.
The current market conditions are ripe for rental bidding wars, said Gary Malin, president of Citi Habitats.
The Manhattan rental market hit record highs in April, with average rents for all apartment categories increasing by 3 to 5 percent year-over-year, according to data from Jonathan Miller, CEO of the appraisal firm Miller Samuel.
The high-end rental market is particularly tight, Miller said, due to a dearth of available properties for sale. For the past year, he said, the average monthly sales inventory has been roughly 20 percent lower than the same period two years ago. As a result, would-be buyers are turning to rentals.
“The tightness of [sales] inventory is partially responsible for the froth in the luxury rental market,” Miller said. “People who want to purchase aren’t necessarily happy with what they’re seeing out there.”
Meanwhile, it’s still difficult to get a mortgage, especially for jumbo loans, he said, leading some wealthy New Yorkers to rent rather than buy. Others are simply still “on the fence about whether to buy,” Malin said.
But desirable high-end rental properties in the city are relatively scarce, in part because “rental properties tend to be very cookie-cutter,” Malin said.
“Unique properties are few and far between on the rental side,” he added.
As a result of all of these factors, the competition for high-end rentals has become intense.
Douglas Wagner, executive director of leasing at Bond New York, said he’s now seeing rental bidding wars — which he hasn’t seen in three to four years — in popular neighborhoods like Chelsea and Tribeca.
In these areas, he said, “any listing between $6,000 and $8,000 — that’s the sweet spot —is snapped up in an instant.”
Frans Preidel of Brown Harris Stevens recently listed a rental unit in the Upper East Side condo One Beacon Court for $75,000 per month. Despite the eye-popping price, he said he entertained three competing offers on the unit, eventually leasing it for $65,000 per month.
To help secure their desired apartments, high-end tenants now regularly offer to pay a whole year or several months’ worth of rent up front, according to Halstead Property’s Warner Lewis.
Contrary to popular belief, however, that isn’t always the best way to land a coveted apartment, Lewis said, noting that it can limit a renter’s leverage with the landlord if something goes wrong. Instead, he said, it’s crucial to cooperate — without complaining — with requests for bank statements and tax returns, since landlords don’t want to be bothered with difficult tenants. That’s especially true for wealthy homeowners leasing out their apartments.
“For owners on the high end who are renting out their property,” Lewis said, “it’s just not worthwhile taking some extra money if the tenant is going to be demanding.”
Tenants must also move quickly in order to snag their desired rental, industry sources said.
When Prudential Douglas Elliman broker Kirk Rundhaug listed a two-bedroom spread at 50 Gramercy Park North last year, it took him four months to find a tenant. A few weeks ago, however, he listed a similar unit in the same building asking $20,000, and quickly received several competing offers on the property. The first bid came in at $17,000 per month, the second at $18,000 and a third at $19,000. Rundhaug asked each party for counter-offers, and the apartment was ultimately rented for $19,500.
As the rental market strengthens, landlords are becoming more demanding, brokers said. Elizabeth Kee, a broker at the firm Core, said she’s already gotten five offers for a 2,500-square-foot penthouse in the boutique Blue condominium at 105 Norfolk Street, all of them slightly below the $14,000-per-month asking rent. But the landlord, confident he’ll get the full price, has turned them all down.
Would-be renters are often unpleasantly surprised by these circumstances, Faust said, noting that they are displeased to find that they might be denied the apartment even after offering more than the asking rent.
“It’s hard to swallow for a lot of people,” said Kee. These wealthy homeseekers, she added, “don’t get a lot of ‘nos’ in their lives.”