Rental concessions in Manhattan hit highest level in nearly 8 years

Nearly 50% of new leases came with rental concessions

Manhattan rentals from 2014 to 2017 (credit: Douglas Elliman)
Manhattan rentals from 2014 to 2017 (credit: Douglas Elliman)

Rents may be rising at luxury residential projects in Manhattan, but it’s not necessarily because the high-end market is strong.

A new report by Douglas Elliman shows that the median monthly rental price for luxury apartments in the borough rose 5.3 percent year-over-year to $8,000 in January. Meanwhile, median rental rates for entry-level apartments fell 4.1 percent from the same time last year to $2,200. The median rent for new development jumped 8 percent to $4,750 last month.

Jonathan Miller, CEO of appraisal firm Miller Samuel and the author of the Elliman report, said the reason for the discrepancy is the high-volume of luxury product hitting the market.

“It’s because the mix is haywire,” he said. “The weakness at the top of the market is being masked by concessions.”

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Last month, concessions reached the highest level seen since Miller started tracking them back in October 2010. In January, 49.3 percent of new leases came with rental concessions — an increase from the previous month’s record-breaking 30.9 percent, according to the report. Concessions last month amounted to an average of 1.4 months of free rent, a 7.7 percent increase from January 2017.

Overall, the median rental price in Manhattan dropped to $3,275 in January, down from the previous year’s $3,369, according to the report. A separate report released by Citi Habitats found that Soho and Tribeca saw the highest median rental price at $5,400 per month. Washington Heights had the lowest with a median rental price of $2,225.

The Citi Habitat report notes that the vacancy rate in January dropped to 1.91 percent in January (Elliman’s report places the vacancy rate at a slightly higher 1.98 percent). Citi Habitats attributes the decrease from December’s 2.09 percent rate to an increase in pent-up demand from the holiday season and to the prevalence of “generous move-in incentives.”

“The city’s rental market is stuck in neutral,” said Gary Malin, president of Citi Habitats. “Month-to-month, we will see a little movement up or down, but pricing has stayed within the same bandwidth.”