Manhattan rents plateau, while Brooklyn continues to boom

Manhattan sees first decline in median rent since June 2011

MNS rental report September 2013
MNS rental report September 2013

Rents in Manhattan may have finally hit a plateau in September, as a spring spike in mortgage rates shunted some renters into the sales market and the vacancy rate edged up to the second-highest level in three years, according to a monthly Douglas Elliman rental market report released today.

The median rent in the borough slipped 3.1 percent year-over-year to $3,095 per month, the first such decline since June 2011, while the average rental price per square foot dropped 2.6 percent year-over-year to $51.25. The number of new rental listings jumped 35.9 percent year-over-year, demonstrating that tenants continue to resist rising rents when their leases are up, choosing to move instead, and leaving apartments that hit the market, according to Miller Samuel CEO Jonathan Miller, who authored the report.

“When sales rise at a significant rate, the buyers come from somewhere,” Miller said. “In this case, the rental demand was poached by the sales market.”

Indeed, rental vacancy rates in Manhattan hit 2.66 percent, Miller added.

Still, rents will likely remain high, Miller said, due to continually tight credit which may be further squeezed by the debate in Congress over whether to raise the debt ceiling. “Uncertainty [about the debt ceiling] makes banks more conservative about lending,” Miller said, which restricts the ability of people to buy homes.

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Citi Habitats President Gary Malin said that the Manhattan market had remained relatively stable compared to the last quarter, albeit at a very high level. “Landlords haven’t really been able to get increases,” Malin said, because the economy and job market haven’t rebounded strongly enough, and vacancy rates have risen slightly.
Quarter-over-quarter, average rents for studios decreased 0.2 percent, according to Citi Habitats’ quarterly rental report released today, but increased 1.5 percent for one-bedrooms, 1.1 percent for two-bedrooms and 3.3 percent for three-bedrooms.
Andrew Barrocas, CEO of brokerage MNS, said that a lack of new rental inventory in Manhattan was due to escalating land costs which made only condominium projects financially feasible.

Only a few neighborhoods, such as Harlem, were seeing new rental inventory, Barrocas said, citing a MNS report released today that found September rents in the neighborhood had gone up 14.6 percent year-over-year.

In Brooklyn, however, tight credit and a shortage of inventory meant that rents saw a sharp jump. Indeed, the median rental price in September increased 10.4 percent year-over-year to $2,800 per month $2,536 per month, the Elliman data show. Renters also gobbled up available units at a much faster pace – the average number of days on market was 33, a year-over-year decrease of 28.3 percent. The average rent per square foot was $38.05, a year-over-year jump of 15.9 percent.

“The rate of growth has not eased up in 2013,” Miller said, adding that renters in the borough were a mix between those priced out of Manhattan and those looking at Brooklyn as a first destination. The spikes in rent were seen despite a 71.7 percent year-over-year increase in rental listing inventory to 1,372 units, as developers opted to build rentals rather than condos.

MNS’ Barrocas said that emerging neighborhoods such as Crown Heights, Prospect Lefferts Gardens, Bushwick and Bedford-Stuyvesant enjoyed the most significant growth in rents. Indeed, Bushwick and Bedford-Stuyvesant have seen year-over-year rent growths of 13.2 percent and 19.8 percent respectively, the MNS data show.