New York’s airtight rental market is starting to show some cracks: Luxury concessions are back.
From Williamsburg to Long Island City to Midtown, brokers and listing sites reveal landlords are again offering a free month, leasing incentives and lower base rent on units that sit.
“It’s only been recently — the last couple of weeks,” said Douglas Elliman agent Jason Amirian.
For a time, surging demand had all but erased the multi-month concessions offered during peak Covid. In July, the median discounted rent in Manhattan smashed yet another record at $4,100, according to Elliman.
But while some agents say the discounts could be an early sign of cooling demand, others are adamant that the party isn’t over.
Where the deals are
One thing agents agree on is where deals are cropping up: buildings a few avenues from the train in commercial districts where rents run $5,000 and up.
“These are the first types of properties to start bringing back incentives, whether it be one month free, paying the broker’s fee, or paying a move-in deposit,” said the Corcoran Group’s Kunal Khemlani.
The Moinian Group’s Oskar, for example, recently offered one comped month on a 13-month lease. The Hell’s Kitchen mid-rise at 555 West 43rd Street is five blocks from the nearest subway. And last week, The Hollingsworth in office hub Midtown South said it would knock off a month and a half for tenants who sign an extended lease, according to sources.
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In part, discounts stem from an overcooked market. The average Manhattan luxury apartment has seen annualized rent rise at least 20 percent each month for the past year, Elliman reports show.
That’s priced out some tenants, Khemlani said, leading to excess inventory. To ease the glut, owners of less desirable buildings are now offering concessions.
“If you’re competing against a great building that has amenities and is close to the subway and you’re two blocks away or you might not have the view, you end up giving the month so you stay competitive,” said Brown Harris Stevens agent Joshua Young.
Outer boroughs beckon
Although proximity to transit remains a priority for tenants, a quick commute still lacks the pull it once had. Brokers say tenants in upscale buildings continue to have hybrid work arrangements, despite the Labor Day push for select industries to return to the office full-time.
Data show office foot traffic edging back. As of mid-August, New York City office visits were down 29 percent from the same week in 2019. That’s a slight improvement from June and July, when visits were down 33 percent, according to location tracker Placer.ai.
Consequently, luxury apartments in outer-borough neighborhoods with easy access to Midtown are offering deals as residents shy from paying top-dollar to be close to the city, brokers said.
Faced with a 25 percent rent hike at his Long Island City rental next month, Khemlani said his family would likely move farther into Queens.
“We’re looking at Astoria or Woodside or Sunnyside,” he said, “because I also don’t need to be in the office every day.”
Just last week, Two Trees promoted a free half-month and $1,500 rent credit for a two-bedroom at Williamsburg’s One South First. That’s a modest break on a rental priced at $11,995, but StreetEasy shows that a month ago it was asking $1,000 more. The rent is far higher than the median asking price for a luxury unit in Manhattan and the building is about 11 blocks from the closest train.
Mortgage rate fallout
The sliding sales market is also stoking some concessions, as individual condo and co-op owners who might otherwise sell are offering concessions to rent out their units. With the average 30-year mortgage rate topping 6 percent for the first time since 2008, would-be buyers are sitting it out.
Though concessions are just one sign of a cooling market, others have begun to arise.
Bidding wars, which stretched into the summer, have dissipated this month. Now, many landlords are happy to get a full-ask offer, Amirian said.
And typically, rent cuts are a last resort. Landlords prefer to offer a concession they can pro-rate, as it won’t show up as a hit to their rent rolls in the event of a refinancing.
“A concession looks good when they’re putting their numbers together,” Amirian said.
Still, prices have been slashed in buildings beyond One South First, listings show. In most cases, those units have sat for at least a month.
In Long Island City, for example, a two-bedroom at Rockrose’s 47-05 Center Boulevard has spent 46 days on the market. The owner has dropped the asking rent to $6,200 from $6,450.
The Moinian Group had been even more aggressive, shaving $300 off a one-bedroom at Sky, on 42nd Street in Hell’s Kitchen. The unit listed just 18 days ago. The landlord knocked another $500 off a separate one-bedroom that has hung around since early August.
Rental trackers also indicate waning demand for higher-priced units. MNS Real Estate found in August that Manhattan rents dipped by a quarter of a percentage point month-over-month, the first decline since last September. The drop was driven by doorman buildings, where the average rent for a one-bedroom decreased by 1.12 percent.
’Tis the season?
Typically, September ushers in a slower rental market. But agents are not ready to say seasonality is back. Having navigated two wildly uncertain years, they know a few dull weeks does not a return to normalcy make.
“It’s not so much, ‘Oh, we’re going into the winter months, we expect everything to cool down,’” said Khemlani. “The seasonal patterns don’t apply this year.”
The agent said because many renters stayed put rather than brave the open market, there have been fewer availabilities than in normal years. As a result, demand could continue to match supply.
Plus, Young said, in buildings that truly deliver a luxury experience — condo finishes, central air, heated bathroom floors — landlords can still nab market prices, sans freebies.
The broker pointed to a building he oversees, Zeckendorf Development’s recently unveiled 115 East 55th Street.
“We’re not giving concessions and we’ve rented 25 percent of the building in the first two weeks that we opened,” Young said of the 58-unit tower.
“I think the luxury market is going to be strong for a while,” he said. “I don’t feel any pullback.”
Agents say concessions have yet to hit less expensive units, meaning the demand shift is not yet citywide.
“The lower-end, middle-end is still very strong; anywhere from $2,000 to $3,000 is still flying off the shelves,” Amirian said, adding that priced-out luxury renters may be boosting that lower-tier.
Rental trackers support that narrative. MNS reported that the average rent for a non-doorman studio, one-bedroom and two-bedroom all rose in August.
“The truth is, we don’t know what’s going to really happen in the next three, four months,” Khemlani said. “It seems like we’re reaching this point of equilibrium, like what comes up must come down. But the market is still pretty strong.”