Renters looking to be just a convenient train ride away from Manhattan are finding more choices as vacancies tick upward in the popular alternative-to-Manhattan neighborhoods of Long Island City, Astoria and brownstone Brooklyn.
As Manhattan rental weakness appears to be spreading, landlords and management companies in prime outer-borough locations are trying a number of tactics to entice renters. Among them are lowering credit standards and absorbing brokerage fees — but sources said the relaxation does not always extend to lowering rents.
Some real estate experts interpret the recent data of fairly strong pricing amid increasing vacancies as a show of continued strength in the brownstone Brooklyn and Western Queens rental markets, while others believe it’s only a matter of time before the areas see significant, across-the-board rent cuts.
Brooklyn inventory rises
Anthony Lolli, CEO of the Brooklyn firm Rapid Realty NYC, says that while the borough’s rental market is “alive and well,” there are more apartments on the market than in years past.
In particular, the firm is seeing more inventory in “prime” neighborhoods such as Park Slope, Brooklyn Heights, and Cobble Hill than ever before, as fewer renters are willing to shell out big bucks to live in Brooklyn’s toniest enclaves.
Lolli notes that 65 percent of the firm’s closed deals in November 2007 came from so-called prime neighborhoods, while in the comparable month in 2008, lease signings in those areas accounted for 51 percent of the company’s business.
“More and more apartment hunters are looking for the most bang for their buck,” he says. “Neighborhoods like Bushwick, Crown Heights and Bed-Stuy are much more marketable now. Prospect Heights, Greenwood Heights and Sunset Park are really attracting former Park Slope residents.
“We expect that this will not change anytime soon,” Lolli says.
Data from other firms that specialize in brownstone Brooklyn rentals also show an increase in the area’s apartment inventory.
Ideal Properties, which rents apartments in numerous brownstone Brooklyn neighborhoods from Brooklyn Heights to Windsor Terrace, logged a whopping 54 percent increase in the number of one-bedroom apartments available in those neighborhoods in the fourth quarter of 2008 as compared to the same period in 2007.
In fact, the company’s data showed an increase in inventory for all unit types: There were 13 percent more studios available in the fourth quarter of 2008 than a year before; 53 percent more two-bedrooms; and 74 percent more three-bedrooms.
Some rents rise, some fall
In terms of pricing, Ideal recorded marked decreases in average asking rents for studios and three-bedrooms: Studios were asking $1,607, on average, in the third quarter of 2008, a $156 drop from the same period in 2007. Average rents on three-bedrooms went from $3,662 in 2007 to $3,313 in 2008.
“In this climate in particular, three-bedrooms would be declining in price due to the simple economics of it — they are normally more expensive, and renters are looking to scale back whenever possible,” says Aleksandra Scepanovic, Ideal’s managing director. “So the people who would have been looking for a three-bedroom are now deciding that two-bedrooms might be doable.”
Still, even though there were more units on the market, Ideal’s numbers for the fourth quarter of 2008 — based on 816 rentals in brownstone Brooklyn during those three months — show average rents rising substantially for one- and two-bedrooms, when compared to the same time the year before.
The firm reported that one-bedroom rents rose an average of $222 and two-bedroom rents rose by an average of $186.
Rapid Realty’s data from December 2007 through November of last year also showed rent increases for most brownstone neighborhoods.
One-bedrooms rented by the firm in Park Slope, for example, increased by $160 over those 11 months, from $1,696 to $1,856.
Lolli says that while the Brooklyn rental market is still strong, that landlords need a “harsh reality check” in regard to pricing. “We have plenty of clients who were looking to buy, but are looking to wait it out and have decided to rent until the economy straightens out.”
Tenants gain upper hand
Other rental specialists in the area are less cheery about the state of the market.
“I think every neighborhood has taken a hit, especially the ones with higher rents, like Park Slope and Brooklyn Heights,” says Andre Campodonico, the CEO of Standard Living Realty, a firm that specializes in no-fee Brooklyn rentals. “People still desire Park Slope more than other neighborhoods, but they have a lot more to choose from.”
He continued, “the ball’s in the renter’s court.”
Campodonico says that “luxury” rentals are sitting vacant because renters are deciding not to move from their current apartments — and those who are signing new leases are seeking out more affordable leases.
All three Brooklyn firms say they’re seeing a big increase in the number of no-fee apartments on the market.
Ideal Properties’ no-fee listings jumped from 1.8 percent in the fourth quarter of 2007 to 22.6 percent in the fourth quarter of 2008, though the company says the trend isn’t taking root yet in the most desirable areas, such as Park Slope.
Rapid Realty’s Lolli says that “no-fee listings are the key to survival in this market,” as are other incentives.
“Over the last six to nine months, tenants have had the upper hand with regards to getting approved, rent negotiations and other perks that sweeten the deal,” he says. “Landlords almost always resort to offering rent concessions as incentives. They realize that nobody wants to pay a broker fee anymore.”
Queens: Prices flat to down
Agents active in Long Island City are also reporting more incentives for rentals there, particularly in relatively new construction buildings, such as Rockrose’s EastCoast development, AvalonBay’s Riverview complex, and the Ciampa Organization’s 140-unit Packard Square near Queens Plaza.
“They are working with renters and they know they have to be a lot more flexible right now,” says Edward Milton Cisneros, an agent with the firm NY Living Solutions.
Cisneros notes, for example, that net effective rents at EastCoast — which, as of last month, included two months’ free rent and an owner-paid agent fee, according to a leasing agent at the building — were basically at the same level as when the units were first offered a couple years ago.
A leasing agent at the building said last month that its studios were starting at $1,900, its one-bedrooms were going for $2,450, and its two-bedrooms were beginning at $3,450. Those prices were nearly identical to the ones on offer at Riverview last month, according to rental numbers provided by an AvalonBay leasing representative.
Cisneros says he has rented about 60 units in Long Island City towers such as EastCoast and Riverview over the past couple years, and it’s the only market outside of Manhattan in which he’s active.
“Rents are coming down in Manhattan because owners are becoming more practical and want their apartments filled,” says Cisneros. “Before it was very clear that Long Island City was a cheaper alternative to Manhattan for renters who didn’t want to compromise on amenities. It used to be a very clear contrast, a $250 to $400 difference between renting in the same sort of building in Manhattan and Long Island City.
“Now the difference is not that striking,” he says.
As a result, says Cisneros, Long Island City doesn’t have a competitive edge in terms of pricing right now, and in recent months he’s had prospective renters choose Manhattan over the neighborhood.
Cesar Guevara, a principal with MQ Realty, a firm that specializes in Long Island City and Astoria rentals, says he believes owners of luxury Long Island City high-rises are going to have to lower rents in the near future to reflect market realities.
“The quality in the new buildings is great, but the problem is that the whole market has changed,” says Guevara. “There’s a definite glut in the market, and it’s going to get worse if New York doesn’t have its typical influx of new hires moving here in the spring.”
On the other hand, Guevara says that “middle-of-the-field” apartments in prime Astoria are renting relatively well, although his firm has seen about a 15 percent increase in the neighborhood’s apartment inventory over the past year and a slight decrease in rental prices.
Guevara says that one-bedrooms in Astoria are renting for between $1,400 and $1,600, two-bedrooms are fetching an average of $1,600 to $1,900, and three-bedrooms are going between $2,000 and $2,500.
“People aren’t coming to Astoria to rent in a luxury building,” he says. “Still, there are an unusually large number of apartments on the market, and some landlords are going to have to lower their rents.”
