The ultraluxury rental market falls to earth
Landlords finally drop prices, offer incentives
In the decade since Robby Browne bought a two-bedroom condo at 15 Central Park West, the Corcoran Group agent has amassed a “nice little nest egg” renting it out for $18,500 a month.
Each time the lease was due to expire, he said, tenants and agents lined up to fill the apartment, which he rarely had to list before bagging a tenant, often one willing to pay the whole thing up front.
But this time around, he knew he’d have to do something different. Not only did he spruce up and furnish the place, he also dropped the price to $16,250 a month.
“I thought, ‘Be sensible, Robby, the rental market is down. Put it on at a price that will work,’” he recalled. “I don’t like missing a month.”
Thanks to the recent condo boom that’s turned scores of investors into landlords, there’s an abundance of ultrahigh-end units on the rental market. And just like the rest of the rental market — where landlords have been throwing out concessions for the better part of a year — tenants in the uberluxe market are scoring fat discounts.
Browne estimated the high-end rental market is down 10 to 15 percent since late 2015. He said that one of his clients, who’d been getting $19,000 to $20,000 a month for his two-bedroom at 40 East 66th Street, agreed to discount the condo to $18,000 .
It’s also taking longer to do deals. Douglas Elliman’s Tal Alexander recently used “light staging” on a $20,000-a-month rental at One57, which still took about 60 days to rent. Alexander said he’s telling clients that overpricing is a waste of time. “If [renters] see the apartment linger, they think it’s more negotiable.”
Halstead Property’s Dorothy Somekh, who is marketing a penthouse at 50 United Nations Plaza for $58,000 a month, said the market will remain soft until the current inventory is absorbed. “The people who are going to rent [to tenants] are the ones that are going to make adjustments quickly,” she added.
Savvy renters, meanwhile, are jumping on the opportunity. “Our clients on the rental market are getting 20 percent off on some of these apartments,” said Bold New York’s Jordan Sachs. “You’re dealing directly with an owner, not a professional landlord. All he wants is cash flow, and every day the apartment sits vacant is affecting his return on investment.”
Neighborhoods like Tribeca and Chelsea that have been magnets for condo developments are teeming with high-end rentals, since many new developments closed in the past year and investors are putting their units on the rental market. “We’re seeing a flood of apartments $40,000 and higher,” said Sachs. To wit, Jennifer Lawrence recently listed the three-bedroom condo she bought this year at 443 Greenwich Street, asking $27,500 a month.
To be sure, uberluxury rentals make up a fraction of the overall rental market, where there were 30,000 apartments available citywide as of late May, according to StreetEasy. A search turned up just 530 apartments listed for $15,000 and up, and about half that number were properties asking $20,000 or more.
Yet, the balance of power is no different in the overall rental market, where agents said supply continues to far outweigh demand, putting pressure on landlords to entice tenants. “There’s a boatload of inventory,” said Citi Habitats’ Rory Bolger. “These landlords think if you build it they will come, but sometimes you wonder: Where are they coming from?”
At the 597-unit Helena rental building at 601 West 57th Street, for example, Durst is paying broker commissions, as is Gotham Organization at its 554-unit Gotham West, at 550 West 45th Street.
But not everyone is worried.
Citi Habitats’ Dave Maundrell said his team is launching five new buildings in the next two weeks — including 371 Humboldt Street in Williamsburg and 248 Duffield Street in Downtown Brooklyn. All five are no-fee with one month of free rent, which is now par for the course in new development.
Maundrell said he thinks landlords are coming to grips with reality after months of pressure to drop prices and offer concessions. “There’s a lot of product that wasn’t really worth what people were asking for it,” he reflected.