The Real Deal New York

Rental concessions in Manhattan hit highest level in nearly 8 years

Nearly 50% of new leases came with rental concessions
By Kathryn Brenzel | February 08, 2018 08:30AM

Manhattan rentals from 2014 to 2017 (credit: Douglas Elliman)

Rents may be rising at luxury residential projects in Manhattan, but it’s not necessarily because the high-end market is strong.

A new report by Douglas Elliman shows that the median monthly rental price for luxury apartments in the borough rose 5.3 percent year-over-year to $8,000 in January. Meanwhile, median rental rates for entry-level apartments fell 4.1 percent from the same time last year to $2,200. The median rent for new development jumped 8 percent to $4,750 last month.

Jonathan Miller, CEO of appraisal firm Miller Samuel and the author of the Elliman report, said the reason for the discrepancy is the high-volume of luxury product hitting the market.

“It’s because the mix is haywire,” he said. “The weakness at the top of the market is being masked by concessions.”

Last month, concessions reached the highest level seen since Miller started tracking them back in October 2010. In January, 49.3 percent of new leases came with rental concessions — an increase from the previous month’s record-breaking 30.9 percent, according to the report. Concessions last month amounted to an average of 1.4 months of free rent, a 7.7 percent increase from January 2017.

Overall, the median rental price in Manhattan dropped to $3,275 in January, down from the previous year’s $3,369, according to the report. A separate report released by Citi Habitats found that Soho and Tribeca saw the highest median rental price at $5,400 per month. Washington Heights had the lowest with a median rental price of $2,225.

The Citi Habitat report notes that the vacancy rate in January dropped to 1.91 percent in January (Elliman’s report places the vacancy rate at a slightly higher 1.98 percent). Citi Habitats attributes the decrease from December’s 2.09 percent rate to an increase in pent-up demand from the holiday season and to the prevalence of “generous move-in incentives.”

“The city’s rental market is stuck in neutral,” said Gary Malin, president of Citi Habitats. “Month-to-month, we will see a little movement up or down, but pricing has stayed within the same bandwidth.”