The Real Deal New York

Renters sign off floor plans, too

It’s not just condo buyers jumping in before buildings are done

August 01, 2014
By E.B. Solomont

It took developers nearly four years to build the Robyn, a Karl Fischer–designed rental building in the East Village. But when leasing launched in June, all 33 units were snapped up within 10 days.

With Manhattan’s rental vacancy rate hovering just over 1 percent in June, the rental market has become so hot that brokers say prospective tenants are lining up to see new construction before it opens, and they are competing for desirable units, which are being leased within hours of becoming available.

“People are signing leases before construction is even done and rolling the dice that it will be complete by the time their lease is supposed to start,” said Joseph Quiros, a broker at Miron Properties, which marketed the Robyn, located at 216 East 3rd Street.

Quiros said the Robyn’s viewing hours were limited to weekdays between 4 p.m. and 5 p.m. to accommodate construction, which heightened anticipation among prospective tenants. Each day, 10 to 20 people would show up with brokers to see the apartments, which ranged from $2,000 studios to $3,000 two-bedrooms.

“It was kind of chaotic, quite honestly,” he said. “There were instances where people would be in a line to put in an application on the iPad we brought.”

While the summer is typically the rental market’s busiest time of year, low inventory and an influx of new renters — namely, would-be buyers who haven’t been able to purchase an apartment — have heightened the frenzy.

Gary Malin, president of Citi Habitats, said the market has “done a 180” compared with last year, when prices were too high and renters backed off. In late 2013, he said, landlord incentives lured renters back into the market and vacancy rates dropped.

According to Citi Habitats data, Manhattan’s vacancy rate in June was 1.1 percent, and lower in neighborhoods like Chelsea (0.68 percent) and Soho/Tribeca (0.78 percent).

Meanwhile, prices are climbing. In Manhattan, the median rental price in June rose 3.3 percent to $3,300, a five-year high, according to a monthly report published by Douglas Elliman and real estate appraisal firm Miller Samuel. In Brooklyn, median rents were up for the 13th straight month, with a median rental price of $2,800 in June.

Manhattan rentals spent 49 days on the market and Brooklyn rentals spent 47 days on the market on average in June, according to the Elliman report.

While well-priced apartments like the Robyn always go fast, brokers pointed to new competition at the high end of the market.

The Nathaniel, an 85-unit luxury rental at 138 East 12th Street in Greenwich Village, leased 10 apartments on the first day of leasing July 21, said Cliff Finn, executive vice president of Douglas Elliman Development Marketing. The building’s studios start at $3,345, one-bedrooms at $4,615, two-bedrooms at $6,950 and three-bedrooms at $10,950. Compared with the building’s projected pricing, Finn said prices are “double what I would have expected.”

The Nathaniel has 500 names on its lead list, or a list of people interested in the apartments, even though it won’t have its certificate of occupancy until Aug. 15.

Particularly at high-end buildings, some brokers said would-be buyers have joined the rental pool. “When someone has a one bedroom, they can easily sell that, but then they go into a pool where they’re a buyer competing with four or five other people for the same apartment,” said Veronica Raehse, sales manager at Bond New York’s Tribeca office.

By selling their apartment and renting for a year, she said, “They can compete a little better, because they don’t have to sell anything.”

Adjina Dekidjiev, a broker at Bond New York, said she’s seen bidding wars for rentals — a practice more typical of the sales market. “The days of ‘sleeping on it’ are over,” she said.

Miron’s Quiros echoed the sentiment.

A few weeks ago, he brought clients to a crowded Saturday afternoon open house on the Upper East Side. When they arrived, seven other brokers were there with clients, waiting to see the apartment, and the listing broker would only allow three people in at a time. “The tension was palpable, because that’s your competition,” said Quiros, who added that his clients walked away from the apartment, a two-bedroom on the fourth floor of a walk-up that rented for $3,225 a month.