After years of gouging the precious, Ivy League snowflakes that flood Manhattan every summer with nothing but their $10 million inheritance checks, a dream and the Faconnable shirts on their back, New York City landlords, courtesy of the flood of new apartment supply coming online, are being forced to offer record-high rent concessions to attract tenants.
Per the latest January 2017 rental report from Douglas Elliman, 31% of NYC apartments rented in January included some form of rent concession, a record high and nearly double the 16.4% from last January. Meanwhile, average rental prices dropped 3.4% YoY and volumes declined nearly 5%.
Manhattan landlord concessions reached a new record as rental price trends remained softest at the top. The market share of landlord concessions rose to 30.9%, nearly double the 16.4% share of a year ago. Each month since July, median net effective rent declined. The current month experienced a nominal decline of 0.1% to $3,259 on a year over year basis. The market share of concessions for 2-bedroom apartments was the highest at 34.9%, followed by 1-bedrooms with 31.4%, 3 or more bedrooms with 29.3% and studios with 26.4%.
Consistent with rental price trends, the entry tier – the first 30% of rental activity, experienced a 1.9% rise in median face rent to $2,295 from the same period last year. Mid tier rents that comprise of the next 30% of rentals, edged up 0.7% to $3,200 over the same period. The upper tier or next 30% of the market was unchanged with a median rent of $4,400. Luxury median rent accounting for the top 10% of the market fell 5% to $7,595.
The aggressive use of concessions helped push the vacancy rate down to 2.35% from 2.82% over the same period. Listing discount, the percentage from the original list price to the rental price, remained unchanged at 3% over the same period.
As Bloomberg points out, rent concessions have been soaring for months now and are nearly triple what landlords had to offer over the summer to attract tenants.
“They know they have to,” Hal Gavzie, executive director of leasing for Douglas Elliman, said in an interview. “As landlords and owners, they would much rather not do it. But you have tenants and renters who are resisting the price increases, and this is now where things are.”
A swell of apartment construction in Manhattan has crowded the marketplace with choices and given tenants leverage to negotiate — and walk away. That means landlords must work ever harder to keep their units from going vacant and appeal to consumers on the hunt for the best deal. Publicly traded landlord Equity Residential, which has 26 buildings in Manhattan, said in its earnings call last week that it’s resorted to offering gift cards as an additional perk at some of its properties to keep up with the competition.
“Tenants feel to some degree that the market is more to their favor,” said Gary Malin, president of brokerage Citi Habitats, which also released a report on Manhattan rentals Thursday. “They’ve kind of grown, over the last five or six months, to expect a concession in certain types of buildings, and without them, they won’t transact.”
Meanwhile, lease volumes continue to crash despite the record-high rent concessions.
But we’re sure it’s probably just the weather…it will all turnaround soon.