“Sex and the City,” season four: Carrie is
at brunch with her girlfriends, complaining about the prospect of having to buy
her beloved apartment. “I’m a New Yorker,” she protests. “I rent.”
Cut to the rest of the ladies, who gently inform her that they all own.
A few years ago, New Yorkers were like Carrie the television character — they might have assumed that they’d never be homeowners, but suddenly they were buying into the real estate market by the hour. And why not? Prices were going up, and for many, it didn’t make financial sense not to.
But times have changed. According to brokers and price-watchers, fallout from the subprime crisis is creating enough doubt in the real estate market here to prompt many to wait out the uncertainty and rent instead of buy.
“People who wouldn’t have considered renting a year ago are considering it now,” said Lawrence Rich, a vice president at Prudential Douglas Elliman.
Three-quarters of New York City’s housing stock is in rental units. A report released last month by Citi Habitats, the biggest rental firm in the city, noted that rents climbed 10.4 percent between 2005 and 2006, and 5.5 percent the following year.
However, more recent data from the Real Estate Group New York found that rents dropped between January and February in doorman buildings throughout Manhattan.
Rich said he’s recently closed rental deals with several well-off clients who have a “wait and see” attitude toward the market. He points to the young family he recently placed in a rental at the Sheffield building on West 57th Street as the perfect example.
“With the market uncertain, they’d rather pay $15,000 a month than plunk down 4 to 5 million,” Rich said.
He said he’s seeing more people rent
in the Financial District partly, he said, to be close to work. He recently rented a
two-bedroom at 15 Broad Street to an Italian couple.
“They had to move here for work,” Rich said, “and since they weren’t sure how long they’d be here, they decided to rent so they wouldn’t have to worry about selling in just a few years.”
Gary Malin, the president of Citi Habitats, said the firm performed better in January 2008 than in January 2007.
“Of course, there is cause for people to wonder what’s going to happen,” said Malin. “The last thing we should do is stick our head in the sand and act like the economy isn’t shifting. But we’re happy with the pace of business.”
His firm is acting as the exclusive agent for two high-end rental buildings: Philippe Starck’s Dwell at 95 Wall Street, and the conversion of the Greystone Hotel on West 91st Street into rental units. These big-ticket projects, said Malin, “prove the vitality of the rental market.”
Dwell hasn’t released prices, but according to StreetEasy.com, 88 Leonard is charging $70 a square foot, and rents at 15 Central Park West are $170 a square foot, way above the average square-foot prices on rentals, which are $57 on the Upper West Side and $52 in the Financial District.
But Dwell is just one of many Downtown high-end rental buildings now getting attention. Sofia Kim, vice president of StreetEasy.com, points to 10 Barclay, where a two-bedroom rents for between $4,000 and $10,000 a month, and 88 Leonard, a 352-unit building leased by Rose Associates.
At the highest end of the market, there are standout Midtown buildings like 15 Central Park West and the Plaza, where some investors are offering their units for rent, but some pricey rental units have languished on the market without takers.
Kim said the overall outlook for the rental market isn’t so rosy.
“The rental market is softening,” she said. According to her research, overall rental inventory in Manhattan has increased by 12 percent from January 2007.
In January, Daniel Baum, COO of the Real Estate Group New York, wrote in his monthly Manhattan rental market report that “average citywide rents continued to cool … [reinforcing] our sentiment that the market has, in fact, turned.”
Baum said that November and December are normally slow rental months, but that he usually sees a January “bounce” in rates. The bounce, however, didn’t happen until February, and even though there was a small overall jump, according to the organization’s report, prices on doorman buildings throughout the city are still down.
In his February report, Baum wrote that “we’re seeing more inventory on the market than we have in a long time, and landlords struggling with excessive vacancies continue to offer concessions.”
Baum attributed some of the price trouble in doorman buildings to the same caution Rich described in his
clients.
“If the media and the marketplace are all crying ‘recession,’ it’s not far-fetched to think as a consumer, ‘maybe I’ll spend a little less,'” he said.