The Real Deal New York

Manhattan rents rise, thanks to a luxury market that’s softer than it appears

Median rents, at $3,360, didn't budge much in November
By Chava Gourarie | December 14, 2017 12:40PM

(Credit: Douglas Elliman)

The rental market in Manhattan has flat lined at an uneasy equilibrium, with rents largely unchanged year over year and concessions remaining at or near record highs.

Median rent in November stood at $3,360 a month, a small increase from $3,350 in November 2016, according to a monthly rental report from Douglas Elliman. The average face rent, at $4,091, was just $4 lower than the figure recorded in November 2016.

A closer look shows that the slight overall increase in median rent is largely due to the pool of new development product that’s hit the market, making up for an uptick in concessions across different price points. According to the report, median rent on new development units increased 7.5 percent year-over-year in November to $4,675, though existing rentals hovered essentially unchanged at about $3,300 a month.

In November, concessions averaged 1.3 months free rent or the equivalent, pushing the median net effective rent to $3,284 a month. Landlords offered concessions on 29.3 percent of units, up from 25.1 percent in November of 2016.

Still, the luxury market continues to soften. Median rent for luxury units, defined as the top 10 percent of the market, fell 4.4 percent year-over-year to $8,255 and the threshold for luxury dropped 2.8 percent to $6,320.

Jonathan Miller, CEO of appraisal firm Miller Samuel and author of the report, said the flat rent overall is somewhat deceptive. “We’re seeing these top level aggregate median numbers stay flat,” Miller said, because new inventory is larger and pricier. “And that’s causing the rents to show strengths that doesn’t necessarily exist.”

Overall, the average rental in November spanned 938 square feet, down 1 percent from the previous year. Rentals over $10,000 a month, by contrast, increased 13.7 percent to 2,426 square feet, and rentals over $15,000 a month increased 20 percent.

“Housing stock is shifting, and that’s causing rental trends to show a more a more neutral direction than what’s actually happening in the market,” Miller said.

Brokers and developers can expect more of the same going forward, according to Miller, with the continuing influx of new rental units keeping the top soft, and entry segments tight.