Much like the sales market, Manhattan rental transactions are up and inventory is shrinking, though rents are still lower than last year, according to first-quarter market reports released today by Prudential Douglas Elliman and Citi Habitats.
Elliman’s report, which is based on data from the Real Estate Board of New York and other sources in addition to the firm’s deals, tracked 2,663 rental transactions in the first quarter of 2010, up 16.3 percent from 2,290 in the same period last year. Citi Habitats, meanwhile, said it did over 2,650 rental transactions in the first quarter, up from roughly 2,300 in the prior-year quarter.
At the same time, listing inventory for rentals fell 30.8 percent, according to Elliman. To see a story about the Manhattan rental market for all of 2009, click here.
Rents remained lower than they were in the first quarter of 2009. The average rent for a Manhattan apartment was $3,812 in the first quarter, Elliman found. That’s down 8 percent from $4,142 in the prior-year quarter and roughly on par with $3,789 in the fourth quarter of 2009.
Citi Habitats found that the average rent for a studio was $1,750, falling 1.2 percent from $1,771 in the same quarter last year. One-bedrooms averaged $2,331, down 4.2 percent from last year; two-bedrooms were $3,277, down 7 percent; and three-bedrooms dropped 5 percent to $4,345.
Rents likely fell even further, since the data often does not account for concessions like a month’s free rent.
“The incentives artificially propped up the rents,” said Gary Malin, the president of Citi Habitats, who estimated that rents had probably declined “a couple of percentage points” more than the reports show.
Still, the falling vacancy rate and heightened activity are encouraging, said Malin. “Prices are likely to increase, albeit slowly, and incentives are starting to go away,” he said.
One reason for the increased activity is “a better outlook about the economy,” said Stephen Kotler, executive director of residential leasing at Elliman.
Moreover, “the rental market is really driven by employment,” he said. “There has been some hiring.”
In particular, he said Elliman’s corporate relocation department has received a number of inquires lately, especially from the finance and pharmaceutical industries. Malin said he has seen the same phenomenon, and Citi Habitats’ corporate relocation department has received at least 10 referrals in recent weeks.
“We’ve seen an increase in people coming here for work,” Kotler said.
Jonathan Miller, appraiser and president of Miller Samuel and the preparer of Elliman’s report, said while the rental market is showing “signs of stability,” it is still anemic compared to boom-time standards.
“The rental market is much better than a year ago, but I wouldn’t characterize it as robust,” Miller said. While 16 percent may seem like a huge leap in transactions, he noted that “we’re just recovering from a down period and getting back to more normal levels.”
According to Miller, one explanation for the dramatic fall in listing inventory is that many homeowners put their apartments on the market last year for both sale and rent, hoping to hedge their bets. Now, many have sold their units, so they are no longer available for rent. “We saw a lot of property that wouldn’t normally have entered the pool,” he said.
Another explanation is that much of the inventory from several large new developments — including 935-unit Silver Towers and the Upper West Side’s Columbus Square — has been absorbed, Kotler said.
There have been fewer large new projects coming on the market lately, he added, though that could change when Frank Gehry’s 76-story Beekman Tower at 8 Spruce Street, which will have some 900 rental units, begins leasing.
Malin said Citi Habitats’ new development marketing group brought 1,700 units to market in 2009 and is set to market some new 1,000 units in the coming months.