Manhattan landlords get wise, Brooklyn rents rise

Concessions rose appreciably in Gotham while rents defied the season in the borough of Kings

Feb.February 13, 2014 12:01 AM

Landlords saw the writing on the wall in January, as residential rents slipped and concessions grew to the highest levels in two years, reports from leading brokerages show.

“Owners finally woke up and realized they needed to incentivize tenants,” Citi Habitats president Gary Malin told TRD. “From mid November through the end of December activity really slowed down. I think pricing was too high for many people.”

Indeed, rents last summer sizzled, when rents in both Manhattan and Brooklyn hit record highs. But they began to slide as tenants started balking at the ever-grander sums they were asked to fork over.

In response, landlords upped rent concessions, usually in the form of one or two months’ free rent. According to Citi’s research, 13 percent of rental deals in Manhattan in January included some sort of inducements, up substantially from 9 percent in December, and the highest such figure since February 2012.

Malin said renters were fed up, and sluggish owners might have begun offering incentives earlier. “It’s just that owners could have done it a few months ago,” he said. “‘Greed,’ is the wrong word,” he said, but trailed off.

Research from Douglas Elliman, provided by real estate analytics firm Miller Samuel, backed up Malin’s statements about the increased use of incentives — face value rents overall declined 1.1 percent year-over-year, per Elliman’s data, to a median of $3,114. Meanwhile, net effective rents fell 1.8 percent to a median of $3,079.

Rental prices slipped for the fifth consecutive month, according to Elliman’s data.

In January 2014, the average monthly rent for a Manhattan studio was $2,029, according to Citi’s data, which only looks at the firm’s own transactions. For one bedroom homes the average was $2,789 while rent for two bedrooms averaged $3,996. The three bedroom rent figure was $5,198.

The priciest nabes remained the same, according to the Citi report. The most expensive was Soho/ Tribeca, with a median rent of $4,525 with Gramercy Park/Flatiron coming in second with a median rent of $3,325.

In Brooklyn, rents heated up even as residents continued to freeze. Rents rose 12 percent from last January to a median of $2,830, the Elliman data show. A spate of new rentals, however, showed that tenants may also be resisting rent increases there, data guru and Miller Samuel founder Jonathan Miller explained.

“The sharp rise in number of new Brooklyn rentals indicates that tenants are resisting their new rental price offered by [their current] landlords and are trying their luck elsewhere,” Miller told TRD. This could explain why the number of new rentals jumped 33.5 percent from December, to 442 freshly signed leases in January. The report also said that “despite rental price growth, marketing times and negotiability edged higher.”

But Malin doesn’t see a truce to tenant-landlord antagonism on the horizon. Landlords, he pointed out, must fight to keep rent rolls looking healthy so they can refinance and meet other bank obligations, even in pricey neighborhoods, as lending restrictions have tightened in many cases.

“The owner has to keep face rents high,” he said. “Even when rents are $5,000 a month.”

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