Brooklyn landlords are doling out concessions at a record-breaking pace.
In July, concessions at residential rental buildings in the borough were the highest they have been in the seven years that they’ve been tracked, according to Douglas Elliman’s July rental market report for Brooklyn, Manhattan and Queens. This demonstrates how protective landlords are of base rents at their buildings, according to Hal Gavzie, executive manager of leasing at Douglas Elliman.
“Concessions continued to work in the boroughs – keeping vacancies from rising,” he said in a statement, “but the rents trends are clearly weakening, with Brooklyn generally weaker than Manhattan.”
Concessions more than doubled from their level a year ago in Brooklyn, with 22.1 percent of new rental transactions including them, more than double last year’s 9.5 percent. The size of the concessions was equivalent to 1.4 months of free rent.
Miller Samuel’s Jonathan Miller, the author of the report, said concessions exceeding 20 percent of transactions was a new phenomenon. However, he believed there was a limit to how much the practice could actually help maintain base rents.
“It’s been a viable tool for landlords to protect the base rent,” he said. “In other words, they’re able to show that the base rent isn’t declining. However, as of late, the base rent has been declining.”
Brooklyn’s median rent including concessions dropped for the third consecutive month and fell 1.8 percent to $2,745 compared to last July, according to the report. The listing inventory in Brooklyn also expanded for the 23rd consecutive month — just one shy of two full years.
Landlord concessions were also up in Manhattan for July, shooting up to 26.5 percent of rental transactions compared to 10.8 percent last July. Although this percentage was even higher than Brooklyn’s, the concessions themselves were a tick lower at the equivalent of 1.3 months of free rent.
Manhattan’s median rent price including concessions also dropped 1.9 percent to $3,350, and the days that properties spent on the market increased from 39 to 43.
It was the same story in northwest Queens, where the market share of landlord concessions was five times higher than it was last year. Overall, 40.8 percent of new rental transactions included concessions, a huge increase from 7.5 percent last year.
However, the size of these concessions actually decreased to 1.3 months from 1.5 months, and the borough’s median rental price including concessions increased by 5.8 percent to $2,901.
Sources told The Real Deal for a previous dive into rental concessions that the practice had become so dramatic, some market-rate rents were effectively meaningless. They could also mean that tenants who live in the buildings will be unable to afford them in the long term, a problem Miller also identified.
“Tenants are reluctant to—become more reluctant to—rent in a building with high concessions,” he said, “because once the concessions lapse, they can no longer afford the apartment, so there will be some pushback.”
“Concessions have a limited impact,” he continued. “They certainly can solve the problem for the landlord in the short term, but I don’t think it’s something that will be baked into the market indefinitely.”