Landlords cling to concessions amid softening rental market

April's median rent was down nearly 2% YOY in Manhattan: report

TRD New York /
May.May 11, 2017 07:30 AM

The use of concessions has become a fixture in the city’s rental market, and while the measures are keeping building vacancies at bay, rents still remain flat.

Last month, the median rental price in Manhattan when factoring in concessions was $3,309, a year-over-year decline of 1.8 percent and the biggest drop in more than 12 months, according the April rental report from Douglas Elliman. Nearly 29 percent of leases signed in the borough during the month had some form of concession, double last year’s rate.

“Pricing is softening even before factoring in concessions. The question is – how big does the market share [of concessions] get before rents just fall anyway? We’re at that point,” said Jonathan Miller, the CEO of appraisal firm Miller Samuel and author of the report. “When [concessions] use is ubiquitous you have tenants renting apartments that, if for some reason the concessions were removed at the end of the one-year term, they can’t afford to live in the apartment.” Miller said the vast majority of leases signed at the moment are for one-year terms, which means tenants are betting rents aren’t going up any time soon.

Some industry insiders say rental concession use is now so widespread, in some cases market-rate rents have become meaningless.

Rents at the lower end of the Manhattan market are healthier than at the top. The median rental price of a studio was $2,575 last month, a nearly 2 percent increase from April 2016. Median rental prices for one-bedrooms and two-bedrooms dropped. For three-bedrooms, the median price decreased by more than 6 percent year-over-year to hit $5,593. The median rent for doorman buildings — 50 percent of the Manhattan market — dropped by 3 percent to $3,758, the biggest fall in nearly 5 years.

“Rents are still high, it’s just that we’re seeing a slow erosion, even with the use of concessions,” said Miller. “It’s unlikely that it’s going to get better — best case it will stay the same, more realistically I would say we will see continued softness.”

In Brooklyn, the net effective median rental price was $2,765 last month, which is almost exactly the same as last year. The use of concessions was almost 15 percent, much lower than in Manhattan, but still double what it was in the borough a year ago.

In Northwest Queens, over 45 percent of leases signed last month included concessions, triple the rate of April 2016. The median rental price after concessions increased 10 percent to hit $2,995, and prices increased in each segment of the market except for three-bedrooms, which dropped 19 percent to hit a median of $2,995.

However, Miller said increased rents in Queens are reflective of new development apartments becoming available, not a booming rental market.


Related Articles

arrow_forward_ios
Gov. Andrew Cuomo has given the go-ahead to reopen schools for in-person learning statewide (Getty; iStock)

School’s back on. Will the NYC resi market follow suit?

School’s back on. Will the NYC resi market follow suit?
New York’s real estate market is becoming two different stories: Manhattan, where deals are falling — and the suburbs, where demand is spiking. (iStock, Unsplash)

Manhattan is cold, the suburbs and Brooklyn are hot: Here’s what the resi market looked like in July

Manhattan is cold, the suburbs and Brooklyn are hot: Here’s what the resi market looked like in July
82-10 Baxter Avenue and 3111 Heath Avenue (Google Maps)

Queens retail sale tops mid-market deals of the week

Queens retail sale tops mid-market deals of the week
Home sale price declines are expected for July, after a recent bump, according to a CoreLogic report. (iStock)

Home sale prices got a bump, but a drop is coming: Report

Home sale prices got a bump, but a drop is coming: Report
(Images courtesy of Victor Group)

The Getty condo chops prices up to 53%

The Getty condo chops prices up to 53%
442 Union Street and 257 Berry Street (Google Maps)

Brooklyn’s luxury market reaches new pandemic high

Brooklyn’s luxury market reaches new pandemic high
Marwan Kheireddine (inset), Jennifer Lawrence and 400 East 67th Street (Getty, Compass, BDL Accelerate)

Jennifer Lawrence’s Upper East Side PH sold at 37% loss

Jennifer Lawrence’s Upper East Side PH sold at 37% loss
Senate Minority Leader Chuck Schumer and Senate Majority Leader Mitch McConnell (Schumer by Tasos Katopodis/Getty Images; McConnell by Ting Shen/Xinhua via Getty)

Schumer v. McConnell on SALT: Who’s gonna give?

Schumer v. McConnell on SALT: Who’s gonna give?
arrow_forward_ios

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

Loading...