New York City might be considered a top rental market, but it can no longer boast the top spot in Marcus & Millichap’s National Apartment Index evaluating 43 rental markets.
Slowing employment growth and a mild uptick in vacancy caused New York City to slip to No. 3, behind No. 2 Seattle and No. 1 San Francisco. The rankings evaluate the strongest markets based on forecasted supply and demand conditions.
The brokerage’s annual national apartment report projects that asking rents in market-rate units in New York City will increase 6.3 percent to $2,976 per month this year, but will remain slightly lower than the 6.5 percent increase in 2007 and 6.4 percent increase in 2006.
Vacancy will remain low, but is expected to increase this year to 2.8 percent. At the same time, building costs are expected to rise and construction will drop to 2,800 market-rate units from 3,600 in 2007.
Signs of a slowdown in New York City are evident in the report, but its Manhattan office maintains a positive outlook.
“It is safe to assume that demand will outstrip supply in the foreseeable future for most product types,” said Edward Jordan, regional manager of the Manhattan office of Marcus & Millichap Real Estate Investment Services. “As long as rents continue to increase and vacancy remains low, 2008 looks like a strong year in terms of fundamentals for Manhattan investment real estate.”
Gary Malin, COO of Citi Habitats, said of the Manhattan rental market: “Overall, we feel that the rental market in Manhattan will remain strong in 2008 in terms of both a low vacancy rate and increases in market rent rates. What remains uncertain, and is a key factor driving both vacancy and rent rates, is the economic outlook for Manhattan, specifically in terms of hiring. Obviously, if hiring remains strong and at levels consistent to 2007, we will continue to see strong gains in the rental market.”
Marcus & Millichap predicted that employment growth will slow to 0.4 percent, or 16,000 new jobs, this year. In 2007, there were 34,300 new positions.
The rental market in the outer boroughs looks promising, the report indicates, due to rezoning, redevelopment and new opportunities for growth.