Equity Residential: NYC rental market is weakening

Apartment landlord blames weak job growth, supply surge

New York /
Feb.February 01, 2017 01:22 PM

Equity Residential’s outlook on its New York rental market continues to look gloomy, with the real estate company on Wednesday bemoaning falling rents and rising concessions in the Big Apple.

While most other markets in the country, especially Los Angeles, are strong, the real estate investment trust expects its revenues in New York to fall by 1.8 percentage points in 2017. Same-store profits had fallen by 3.1 percent in 2016. The culprit: growing supply thanks to new construction, and mediocre growth in high-paying jobs.

“Financial services are contracting and tech job growth has stalled,” the company’s COO David Santee said in the fourth-quarter 2016 earnings call, adding that most new jobs in New York are in low-paying sectors like retail and hospitality. That drives rents down and concessions up.

The company has budgeted $4 million for concessions in 2017 in New York – a figure no other market comes close to (it budgeted around $90,000 for Washington, D.C. and $80,000 for Seattle). “We are already hearing some crazy stuff like three and four months free on 12-month leases,” Santee said, speaking of the market more broadly.

The company also set aside money for gift cards, but will only use it when “absolutely necessary.”

“The first line of defense is rates, second concessions and last gift cards,” Santee said.

The Sam Zell TRData LogoTINY-led company didn’t come close to reaching projected targets in New York during 2016. And in October, company leaders told investors there was a “high probability” of negative revenue growth in 2017.

Earlier Wednesday, The Real Deal reported that some observers are growing concerned about the overall multifamily market’s stability. Between December 2015 and December 2016, the average apartment rent fell by 2.5 percent in Manhattan and by 3.8 percent in Brooklyn, while concessions rose dramatically, according to Miller Samuel data.


Related Articles

arrow_forward_ios
CHIP executive director Jay Martin (iStock)

Rent-stabilized tenants owe landlords more than $1B

Rent-stabilized tenants owe landlords more than $1B
Cea Weaver (Photos via Twitter; Getty; iStock;)

How a socialist on City Planning Commission would affect real estate

How a socialist on City Planning Commission would affect real estate
John Catsimatidis (Getty)

John Catsimatidis wants to add three more rental towers in Coney Island

John Catsimatidis wants to add three more rental towers in Coney Island
Open New York's Will Thomas and Kyle Dontoh (Photos via Getty; iStock: Open New York)

Outsiders for years, NYC yimbys move into mainstream

Outsiders for years, NYC yimbys move into mainstream
Empty offices, shut down retail stores, closing restaurants and literal fires are among the biggest real estate disasters of 2020. (Getty)

Worst of the worst: The real estate disasters of 2020

Worst of the worst: The real estate disasters of 2020
Mayor Bill de Blasio (Getty; iStock)

City formalizes push for security deposit alternatives

City formalizes push for security deposit alternatives
Clockwise from left: Richard LeFrak, Related chairman Stephen Ross, A&E's Douglas Eisenberg, Cammeby’s International Group founder Rubin Schron and Blackstone president Jonathan Gray (Getty, iStock)

These are NYC’s largest rental landlords of 2020

These are NYC’s largest rental landlords of 2020
New York Assembly Speaker Carl Heastie, Gov. Andrew Cuomo and Senate Majority Leader Andrea Stewart-Cousins (Getty)

Landlords criticize “asinine” eviction and foreclosure bill

Landlords criticize “asinine” eviction and foreclosure bill
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...