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New residential rental report shows weak market fundamentals
New hires with delayed start-dates are helping to temporarily support the rental market, but likely won’t be enough to prevent further price declines this winter, according to Daniel Baum, the CEO of TDG/The Real Estate Group New York, which released its October Manhattan rental market report (see below for the full report) today.
This spring, law firms and consulting companies began offering new hires incentives to push back their start dates. For example, in March, law firm Cravath, Swaine & Moore asked first-year associates to postpone their start date with an option of beginning in October, November or January, according to the American Lawyer.
These kinds of decisions had an impact on the rental market, Baum said, as those new hires postponed their apartment searches until the fall. That, combined with rising unemployment, led to a slower-than-normal summer rental season, Baum said.
He said this group of renters is finally moving to the city and that their presence is helping to temporarily prop up the rental market.
“On a month-to-month basis, that demand has supported the market,” Baum said, as evidenced by the fact that rents stayed “relatively flat” in October, the report found, with rents “down about a half a percent across the board from September.”
Still, it likely isn’t enough to prevent prices from sliding this winter as the market slows and overall unemployment continues to rise.
“I don’t think it will be able to sustain and counteract the seasonality of the rental market,” Baum said.
Of course, different neighborhoods have seen very different price trends. Rents in the most popular areas, like Tribeca and Soho, have increased. For example, the average rent for a one-bedroom apartment in Tribeca was $4,592, up 8.67 percent from last month, the report shows.
Still, overall trends show weak market fundamentals. Vacancies in Manhattan increased 1.72 percent in October — the biggest increase in vacancy in six months, the data shows.
“It is this glut of inventory combined with a still unstable employment picture that leads us to expect continued downward pressure on the market this winter,” the report says.
Rents across the city have declined around 10 percent year-over-year, the report found. The largest decrease was in doorman one-bedrooms, which fell 10.45 percent to $3,282 in October, down from $3,665 in the same month of last year. Non-doorman one-bedrooms held up the best, decreasing 8.34 percent to $2,632, down from $2,872 in October 2008.
Several areas are reporting their lowest price points since TREGNY began compiling rental data in 2007. (TREGNY merged with the Developers Group this spring. Non-doorman studios in Murray Hill, for example, dipped to an average price of $1,775, the lowest TREGNY has on record.