Record apartment vacancy rate predicted for next year
December 24, 2008 05:57PM By Adam Pincus
Report says Long Island City could suffer surplus of market-rate housing
In 2009, the vacancy rate in market-rate rental apartments will rise to its highest level in at least 28 years, as mounting job losses drive renters from the city, a new report from commercial real estate services firm Marcus & Millichap predicts.
The vacancy rate will reach 4.7 percent, topping the previous record of 4 percent in the fourth quarter of 2003, the firm determined in its 2009 National Apartment Report. The firm has been tracking apartment vacancies in unregulated apartments since 1980.
The rate of rental vacancies has been rising since reaching a recent low of 2.1 in 2007. The report puts the 2008 vacancy rate at 3.4 percent. The data is based on a survey of market-rate, one-, two-, three- and four-bedroom apartments in Manhattan, Brooklyn, Queens and the Bronx.
The rental market will continue to be weakened by job losses, which could reach 94,000 in New York City in 2009, a loss of 2.6 percent, the report said.
The report's authors said that there would be fewer vacancies in more established residential areas such as the Upper East and West sides and the Village. But areas that are more on the fringes, where an increasing number of units are being built, will fare worse.
"Supply concerns will mount in Long Island City, Midtown West, the Financial District and southeastern Harlem, where deliveries will be elevated and the threat of shadow rentals persists," Edward Jordan, regional manager of the Manhattan office of Marcus & Millichap, said. A shadow market exists when homeowners turn to renting out their units because they cannot sell them, which in turn increases the rental apartment stock.
Despite the rise in the rate of vacancies, prices in large, market-rate buildings will rise, albeit a small 2.1 percent, to $3,006 per month, according to the projection, from an average of $2,944 this year.
The increasing vacancy rate will be pushed up by construction; the number of apartment units constructed will rise to 2,500 next year from 1,997 in 2008, according to the report.
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Comments
Anonymous
Which means you better lower those prices Rockrose and start being nicer to your tenants.
Comment #1 Posted By: Anonymous 12/24/08
Anonymous
And brokers who bring clients to Rockrose developments need to be better/politer human beings.
Comment #2 Posted By: Anonymous 12/24/08
Anonymous
"Despite the rise in the rate of vacancies, prices in large, market-rate buildings will rise," As usual some desperate real estate shill is pulling arbitrarily rosy numbers out of his ass. Um, increased supply/lower demand equals lower prices. Always.
Comment #3 Posted By: Anonymous 12/25/08
David Rainmaker
There is no question about it; prices will fall more. Average one bedroom that was $2900 before the crush is now $2300 per month. But I wander if the market falls down to $1200 per studio in a nice location. I think it's a possibility.
Comment #4 Posted By: David Rainmaker 12/25/08
Anonymous
At what city-wide vacancy rate does rent regulation terminate?
Comment #5 Posted By: Anonymous 12/25/08
Vacancy rates in Manhattan are already over 3% as many owners struggle to adjust to the rapidly dropping rental market and are having trouble determining what their apartments are worth. The ones that are renting realize we are "back to the future" and the rents are roughly equivilent to 2003 numbers. Tenants can be found if the rents are lower, they dont have to pay a fee and they feel they are getting a reasonably renovated apartment. The days of increases for non-renovated units are over and the smart owners who invest in their realestate will be fine. The rest deserve what they get; MANY EMPTIES!
Comment #6 Posted By: 12/25/08
Anonymous
ISNT THERE A NYC LAW WHEN VACANCY REACHES 5%, RENT STABILIZATION WILL CEASE.. ARE WE ALMOST THERE?!?!?!
Comment #7 Posted By: Anonymous 12/25/08
Anonymous
yes, Stabilization and Rent Control were supposed to only be in effect as long as the vacancy rate was less than 2%.
Comment #8 Posted By: Anonymous 12/25/08
Anonymous
Watch out Brodsky.Take better care of your renters or you will be very empty on the UES.
Comment #9 Posted By: Anonymous 12/25/08
Anonymous
Rent Stabilization terminates when the vacancy rate hits 5%.
Comment #10 Posted By: Anonymous 12/25/08
Anonymous
Rents may rise, but the "free months" landlord's will give to renters will skyrocket.
Comment #11 Posted By: Anonymous 12/26/08
Whokebe
When I went to the Magellan in Herald Square in October, the rent for an upper floor studio was quoted as $2750 for a 13 month lease with one month free. When I went a month later, the rent had become $2280 for a 12 month lease.
Comment #12 Posted By: Whokebe 12/26/08
Anonymous
Guys, we are still in December. Always been a down month and even season for renting. Relax. Spring, Summer will boost rentals, but not as much as last year, but will get better.
Comment #13 Posted By: Anonymous 12/26/08
Anonymous
There's no way that seasonal demand will return in the spring/summer. It could actually be much worse as the large number of expiring leases will not be renewed and there will be few renters willing to fill them, except of course people looking to get a better than their existing overpriced leases.
Comment #14 Posted By: Anonymous 12/26/08
Anonymous
op's op's op's and more op's
Comment #15 Posted By: Anonymous 12/26/08
Anonymous
You didn't mention Tishman Speyer, whose maiden(ahem!)venture into residential real estate, the purchase of Peter Cooper Village and Stuyvesant Town, has been worthy of the Three Stooges. They overpaid, underestimated the #of units they could convert from rent-stabilized to market-rate, and poured millions into eyesore landscaping and unutilized "amenities". It'll take a lot more than some bogus "seasonal demand" for them to avoid defaulting on their mammoth mortgage.
Comment #16 Posted By: Anonymous 12/26/08
hkman
Rental agent for 20 years here and have been seeing rents fall all over. This nonsense that some are exempt from softening rents is just that nonsense. It's supply and demand period. Spring won't change anything because the job hiring is dead. Once a person is laid off NYC is to expensive to be in a holding pattern. What compounds the problem for owners is most 20-30 year olds have ZERO saved and mommy and daddy are not as willing to pay for their unemployed kids luxury apartment at 30. We'll see rents dropping for a while. From apartments always renting while occupied I know 4 places that have been vacant since October and more coming. J O'K
Comment #17 Posted By: hkman 12/27/08
Anonymous
RE Broker for over 18 years. I believe that with OBAMA taking office the energy will begin to shift and while the cost of renting will be lower then in recent years gone by, the lack of jobs will continue to keep prices down for several years. Because the economy has not totally settled or leveled off. So 2010 has more surprises in store, developers know this. IMHO Manhattan will be fine / that is different from flourishing and the outskirts of Manhattan will be more attractive to those who can no longer afford the big city. There will be great buying opportunities for some who have the money, and there will be a huge change in valuation.
Comment #18 Posted By: Anonymous 12/27/08
Anonymous
If the vacancy rate goes over 5% in NYC which is certainly possible, the end of rent stabilization would be a game changer in NYC real estate. Rents overall would come down significantly and there would be a boom in the construction business because of all the old rent stabilized apartments that would have to be renovated after being vacated by the previously rent stabilized tenants. Overall it would be a great thing for the city of New York and for most of its citizens. Though obviously, previously rent regulated tenants would have to come to grips with the fact that they are were going to have to start paying their own way -- which is the only fair solution anyways. If they want cheap rent, they can move to Allentown PA or to the Bronx.
Comment #19 Posted By: Anonymous 12/27/08
Anonymous
I will never benefit from a housing lottery like many Americans did. So don't ask me to take money away from my family for those who rolled the dice and lost. If you purchase or rent an apartment that you can afford, how can you get "pushed out" of the city that you call home. I am sorry, I just don't get it. This is my city, just as it is yours. We will find affordable housing and get on with life. This is NYC for God Sake, this is not some 3rd world country. Listen to yourself!!
Comment #20 Posted By: Anonymous 12/28/08
Anonymous
Comment #24 is right on the mark. NYC is not Disney World. There are many people who call Manhattan home and their not going anywhere no matter what the local economy does.
Comment #21 Posted By: Anonymous 12/28/08
Anonymous
I run 40 rent regulated buildings and have a 2.3% vacancy rate right now. The buildings are located in the Bronx and Upper Manhattan. This report says NYC is at 4% vacancy...but that is for non-regulated buildings. Rent Control will disappear only after a HUGE political battle and many many years of high vacancy throughout all major boroughs.
Comment #22 Posted By: Anonymous 12/29/08
Anonymous
The report done by M & M only references market rate units. Rent regulation is only supposed to be in effect during a "housing emergency" which is defined as a vacancy rate below 5%. The 5% applies to ALL units, not just rent regulated units. Even if the unemployment continued to grow (which it will) and overall vacancy exceeded 5%, politicians (particularly the City Council) would never let regulation expire without years and years of litigation.
Comment #23 Posted By: Anonymous 12/29/08
Anonymous
Marcus has a New York office? Since when?
Comment #24 Posted By: Anonymous 12/29/08
Anonymous
Politicians will not allow rent regulations to expire, BECAUSE THEY ALL LIVE IN REGULATED APARTMENTS. or sometimes they live in 4 of them. More government--more corruption. Less government, less corruption. Clearly we have not learned our lesson from our founding fathers.
Comment #25 Posted By: Anonymous 12/30/08
Anonymous
Brodsky could care less about his tenants on the UES they all complain about repairs idiot on site management crap super and over priced psuedo renovated apartments. thats what you get for a luxury building in the brodsky croyden
Comment #26 Posted By: Anonymous 01/06/09
Anonymous
I was given a deal from my apartment building after I told them I was going to leave because of the rent increase. I have a very nice apartment, but in this economy and the fact that my complex is now renting apartments for less than what I am currently paying, I decided to negotiate.
Comment #27 Posted By: Anonymous 01/10/09
Anonymous
In response to #21. If you don't have a job, how can you pay the high rent prices? Not having a job could potentially push a lot of people out of the city and back to their home towns. Have you ever tried living on unemployment in a big city? It doesn't work!
Comment #28 Posted By: Anonymous 01/10/09
Anonymous
What can Rockrose do to you if you vacate 1.5 months early due to lack of employment? They already have my $3000 damage deposit for my overpriced-undersized luxury apartment at $2950/mo., so that financially equates to bailing on them for .5 months rent. We've had to move back to the West Coast to be with family until we find employment, for God's sake! Please help with your input.
Comment #29 Posted By: Anonymous 01/23/09
Anonymous
What are the options available to a person who has been laid off and has seven months remaining for his lease to expire? He has no savings to pay the rent of $ 2500 p.m. for a studio in Manhattan. Is Obama administration going to help such people as it is trying to help people defaulting on mortgage payments. Any information whom to contact in Government for help would be useful and would be appreciated.
Comment #30 Posted By: Anonymous 02/23/09