The tight inventory of for-sale residential properties, along with a glut of high-end homes going unused by their owners, is fueling a growing supply of luxury rental units in trophy buildings with prices of $100,000 per month or more.
Not only is the high-end rental inventory available, but the activity in the sector is also robust — even if not all of the units are achieving their listing prices.
That rental activity, sources say, is tied to the recent action in the high-end sales market, where record deals include last month’s closing of the $50.9 million sale of the penthouse at Walker Tower, and last year’s $42 million condominium purchase at 18 Gramercy Park by Houston Rockets owner Leslie Alexander.
“There is a certain ebb and flow” between the sales and rental markets, said Jonathan Miller, president and CEO of appraisal firm Miller Samuel.
“If you see record high-end activity in the purchase market, then you’re going to very likely see record high-end activity in the rental market. They don’t operate in a vacuum,” he said.
This month, The Real Deal compiled a list of Manhattan’s 15 priciest rentals for all of 2013 and through the beginning of this year. Using data from listings website StreetEasy, Real Plus and from brokers, what we discovered was that amid record-shattering co-op and condominium prices recently, the rental market was nearly as staggering.
While no deals matched 2012’s priciest rental, at $135,000 per month, 2013 scored two six-digit rentals and a third deal which nearly hit that mark at $92,500 a month.
In addition, as TRD reported in its latest Data Book, 2013 saw more than 10 Manhattan rental listings for over $100,000 per month, with the priciest asking $150,000 for a townhouse at 4 East 80th Street.
However, only two ultimately rented for those six-figure prices. Both were penthouse units at Trump Park Avenue at 502 Park Avenue, priced at $100,000 per month and listed by Trump International Realty’s Michelle Griffith. Each one has seven bedrooms and over 7,000 square feet.
The ultra-high-end renters who opt for such properties, brokers said, generally belong to one of three camps.
First are discerning homebuyers who need a temporary, yet suitably glamorous, crash pad while they look for a more permanent home. Many of those renters are being steered to lease for now because the inventory squeeze in the sales market means there are limited options for properties to buy.
Next are those who have the $70 million to spend on a new condominium in a building like 15 Central Park West, but would rather spend a lesser amount, preferring the stock market or other types of investment to real estate.
And finally, there are the out-of-towners (both international and domestic) who spend a limited amount of time in New York, but want to live and entertain in the grandest possible style while they’re here.
Many of the other top rental deals on the list were in trophy buildings. Those buildings included the Towers of the Waldorf Astoria, the Plaza at 1 Central Park South, and 15 Central Park West.
“I think that the properties being rented are unique, and unique space is part of the math,” Miller said.
“They’re not just paying these high numbers because they can afford to pay it — they’re paying high numbers for unique properties that typically aren’t in the rental market.”
On the flip side, Miller said pricey rentals offer luxury homeowners a lucrative cash flow source, particularly when the apartments are pieds-à-terre that are seldom occupied.
He said those owners simply want their money parked in New York real estate but that the rental income serves as a bonus.
Meanwhile, many high-end renters also come to New York for medical care and in other short-term rental scenarios, according to Margaret Bay, a longtime high-end rental agent for Brown Harris Stevens.
Her $92,500 rental deal at the Waldorf was the third highest on the ranking.
Bay said at the top of the market, renters are also often waiting for renovations to be complete on their permanent homes, relocating to New York to get their children into schools, or coming to New York for just a few months to spend time with their families.
“I still think people are willing to spend it as long as the unit gives them what they need,” said Emily Beare, a CORE broker who had one of the year’s priciest rental listings with a $125,000-per-month five-bedroom at 15 Central Park West, a deal that came close but did not ultimately close.
“When you have something very limited and unique, the value is there and people will spend it,” she said.