“Quirk” in luxury rental activity skews median prices in May

Concessions finally result in lower vacancy rate after two years: report

Clockwise from top left: 625 West 57th Street, 282 11th Avenue and 88 Fifth Avenue
Clockwise from top left: 625 West 57th Street, 282 11th Avenue and 88 Fifth Avenue

The universe of renters willing to shell out $15,000 a month may be small, but a flurry of pricey leases pushed Manhattan’s median rental prices higher last month.

Thanks to a “quirk” in the luxury market, Manhattan’s median price rose 2.2 percent to $3,475, according to Jonathan Miller, head of appraisal firm Miller Samuel and author of Douglas Elliman’s monthly rental report. That coincided with the number of leases above $15,000 shooting up 95.6 percent year-over-year to 88, Miller said. Leases above $10,000 a month rose 40.7 percent to 197.

According to Miller, those big-ticket deals can be attributed to an influx of investment properties that hit the rental market. “You saw a real uptick in activity because we had a surge in high-end product coming to the market,” he said. (Ironically, prices at the top remained soft, he said.)

Overall, Manhattan’s net effective rent — which takes concessions into account — dropped 0.6 percent to $3,377 last month. More than 25 percent of Manhattan apartments rented last month came with some sort of landlord concession compared to 12.6 percent a year ago, according to the report, which found the average size of concessions was 1.3 months of free rent.

While landlords likely were not too pleased, those concessions had the desired effect: New leases increased 17.1 percent compared to the year prior and the vacancy rate dropped to 1.72 percent — the lowest level in two years.

“Normally, you’ll see that drop off when you get into the peak of the rental season. I haven’t seen it drop off considerably yet,” said Hal Gavzie, Elliman’s executive director of leasing, who has encouraged owners to adjust pricing to more realistic levels.

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In Brooklyn — where the median rent dropped 1.9 percent to $2,820 — new leases were up 22.8 percent as the share of new development units in the market increased. There were landlord concessions on 15.2 percent of deals, up from 8.8 percent a year ago.

Northwest Queens also saw inventory expand thanks to new development, where four out of 10 rentals were in new buildings. “A huge chunk of that market is new development,” Miller said.

Overall, the number of deals also surged 54.9 percent with a median rental price rose 9.6 percent to $2,990. The share of deals with some form of concession was 37.9 percent.

In its own report, Citi Habitats said Manhattan’s vacancy rate fell to 1.58 percent — the lowest since August 2015. “It just shows that there’s a lot of volume going on, but it’s definitely driven by price and concessions,” said Citi Habitats president Gary Malin. “If you remove concessions or increase pricing, the vacancy rate would go back.” He cautioned owners to “moderate their strategies.”

In May, Citi Habitats found Soho/Tribeca was the most expensive submarket last month, with a median rental price of $5,925 a month. Dumbo’s median price was $4,750. The lowest rents in Manhattan were in Washington Heights, where the median rent was $2,175. Bedford-Stuyvesant had a median rent of $2,495.