Mike Fabbri has been quietly searching for a buyer for his client’s West Village townhouse. So far, he hasn’t had any takers.
Instead, the Agency broker is fielding calls from agents offering tenants for the property, a prospect he said his client is now open to, in part, because of what he thinks the home will fetch.
In years past, Fabbri said the abode would likely command a monthly price between $60,000 and $70,000, but he’s floating the home for $150,000.
That five-figure price jump might seem like wishful thinking, but Fabbri said he’s already nailed down a few solid leads for prospective renters looking for a place in the city for the summer months.
“It’s almost a joke at this point,” Fabbri said. “Every time you list a high-end property, $10 million or more, the first inquiries are always, without a doubt, someone asking if the seller would consider renting instead.”
The story with Fabbri’s West Village listing is one that’s playing out at high-end properties across the city, where demand for ultra-luxury rentals has skyrocketed in recent years, significantly outpacing the number of desirable and available homes.
“It’s almost a joke at this point. Every time you list a high-end property, $10 million or more, the first inquiries are always, without a doubt, someone asking if the seller would consider renting instead.”
With few homes on the market for rent, those on the hunt for temporary pads are upping their offers by tens of thousands of dollars just to compete. If a spate of recent six-figure deals is any indication, tenants in the upper echelons are willing to pay whatever they can to lock down a home.
The demand is “off-the-charts high,” said Compass’ Vickey Barron, pointing particularly to turnkey properties. “People just start throwing money at you.”
The upswing could soar even further, as a tight new development market threatens the supply of for-sale homes, keeping would-be buyers on the sidelines in their rentals. That dynamic is likely only to be exacerbated by a controversial new tax on the city’s priciest second homes, which is set to go into effect later this year.
A look at the numbers
The full picture of the luxury rental market is murky because the city lacks a centralized database. The length of the lease term also affects the monthly price, as homes rented for a few months at a time are likely to command higher rates, while full-year or multi-year leases tend to be lower.
Absent the numbers, it’s difficult to pin down a city-wide record for the priciest lease ever inked, though brokers who deal in that segment of the market say some of the latest deals are raising the bar.
The tremors of the growing market appeared in December, when a condo at Naftali’s the Benson on Madison Avenue rented for $95,000 a month, or $288 per square foot — one of the highest prices per square foot ever achieved in the city for a 12-month lease.
Two months later, former Howard Hughes CEO David Weinreb rented his penthouse in West Chelsea for $177,500 a month, beating out some of the city’s previous eye-popping rental deals.
That same month, Eli Bronfman, heir to the Seagram liquor fortune, found a tenant for his condo at 20 Greene Street in Soho for a monthly rate of $120,000, likely the priciest lease ever inked in the neighborhood.
After Miki Naftali’s purchase of 800 Fifth Avenue sent the building’s tenants on the hunt for new homes earlier this year, Brown Harris Stevens’ Lisa Simonsen said she helped one previous renter ink a new lease for a condo at Fasano Fifth Avenue for $175,000 a month — a significant upgrade from the $30,000 the client was paying.
The sky-high prices are driven by increased demand for the properties, especially in the short term, as new classes of wealthy tenants add to the city’s already deep bench of ultra-luxury renters.
Among the usual contingent are athletes, musicians and actors, who have long sought temporary housing in the city while on a trial period with a new team or during a film shoot. The city’s pool of luxury buyers also often make up a chunk of the renter population, thanks to lengthy renovations.
But the city has more recently also attracted other groups of tenants with big budgets, particularly after the wildfires in Los Angeles left many without homes on the West Coast, said Fabbri, who says a significant piece of his rental business over the last year has been arranging six-month leases for former Angelinos looking to try out the Big Apple before pulling the trigger on a major move.
Other groups of tenants include executives at artificial intelligence companies seeking rentals as they help their firms set up shop in the city, which has seen a number of AI startups enter the office market in recent years.
The stock market’s banner performance over the last few years has also fueled the rise in high-net-worth renters, due in part to exponential wealth growth as well as a desire to keep money in the market instead of in real estate assets, according to Barron.
She added that many of her clients say that they’d rather shell out the cash for five-figure rent and invest their nest eggs rather than use it to make an offer on a property, considering the returns on their market investments are higher for the time being.
“I ask my clients, ‘why spend $40,000 a month when you could buy?’” Barron said. “But what they can do with that $10 million on an investment level pays for the $40,000-a-month rental. They can make money with that money and maintain liquidity.”
Inventory struggles
Some of the demand for high-end rentals is also driven by a lack of quality inventory in the sales market, said Douglas Elliman’s Ben Jacobs and Jessica Chestler, who together run the Chestler Jacobs Team. The duo said many of their latest rental deals were for prospective buyers who couldn’t find the right home and wanted to buy themselves more time to keep looking.
But the tight inventory is making it hard for Chestler and Jacobs to find those temporary rentals. The two said one client recently called to request a rental on the Upper East Side with a $100,000 budget, but they haven’t been able to find anything that works.
Part of the challenge for many buyers on the hunt for a home is the city’s lack of new development product, said Serhant’s Peter Zaitzeff, who helped broker the $95,000-a-month rental deal at the Benson.
“There will be none in the next two years,” Zaitzeff said, referring to new development inventory. “Artificially, [rental] prices will go up because there’s nothing to buy.”
Now New York City is preparing to implement a new tax on pieds-à-terre worth $5 million or more, which some say could push even more people, reluctant to pay more carrying costs, into the ultra-luxury rental market.
“We’ll lose buyers to rentals,” Zaitzeff said. “If people were on the fence about buying before, they’re just going to rent a place. They don’t care about spending $50,000 to $100,000 on a rental to have optionality instead of paying this ridiculous tax.”
But on the flip side, the tax could spur an uptick in new inventory, with second-home owners looking to avoid it by renting out their New York City homes, since the law exempts properties with full-time tenants.
“This pied-à-terre tax, obviously, raises a lot more questions than answers at this point,” Zaitzeff added.