The Real Deal New York

Manhattan rents, at an all-time high, grow — but so do vacancy rates

An average rental on the island now costs $3,461 a month
By Adam Fusfeld | September 13, 2012 12:01AM

Manhattan residential rental rates reached a new all-time high for the sixth consecutive month, according to Citi Habitats’ latest rental report but there could be some signs of relief in sight. The vacancy rate stood at 1.19 percent last month, the highest it has been in the month of August, typically the peak of the rental market, in three years. In August 2011, for example, the vacancy rate was 1 percent.

This marks the second straight month of relatively high vacancy rates, which could be a sign that renters are balking at higher prices.

Citi Habitats President Gary Malin attributed the elevated vacancy rate to high rents — thus compelling renters to consider buying and removing the incentive for people to move. He also said that more New Yorkers are increasingly open to the idea of living off the island and finding more affordable spaces in Brooklyn and Queens.

“Good time or bad New York is always a draw for people,” Malin told The Real Deal. “But prices are becoming an issue.”

The combination of the elevated vacancy rate, which Malin was quick to point out is still extremely tight relative to just about anywhere else in the country, and the seasonal cycle, means rents are likely to slip, albeit very moderately.

Also in August, the overall average rent rose just $2 from July to $3,461, the just-released report showed. That represented a 3.3 percent increase over the average rent in August 2011. That appreciation rate was uniform across most Manhattan neighborhoods, although larger units showed greater rent hikes than smaller ones. Studio rents grew 3.9 percent annually to $2,092; one-bedroom rents jumped 3.7 percent to $2,785, two-bedroom rents climbed 9.7 percent to $4,032 and three-bedroom rents increased 6.2 percent to $5,320, according to the brokerage’s analysis of its own deals.

Just as rents rose evenly throughout Manhattan’s neighborhoods, vacancy rates were higher, year-over-year, higher across the island —except in two neighborhoods. The largest drop occurred in Battery Park City, where the vacancy rate slipped to 0.91 percent, the fourth lowest in the city, from 1.09 percent. Not surprisingly, the Soho-Tribeca area also experienced a drop in vacancy rate to 0.89 percent, from 1.02 percent.