Why your manegement company might refuse to negotiate a lower rent on lease renewal.

makes sense. plus, i think it always plays better in a corporate setting to act like a tough guy. suggesting reasonableness to customers (behind closed doors) does not result in promotions.

That's a lot of assumptions.

But why would tenants blink? Real-life example: say you're paying $3,750 for a one-bedroom in Chelsea. Your building is offering an equivalent unit (slightly better, if anything) for $3,000/month + one month free. Various other management companies have similarly priced comparable units.

Moving is going to save $1,000/month or $12,000/year. Under what circumstances would you NOT move in this instance? You'd be nuts. Even figuring half of that ($500/month difference), are you going to throw away $6,000 just because you don't want to move? Even with the cost of moving and some potential overlap, you're still looking at significant savings. Do you really think 9 in 10 people, per your estimate, are going to just accept this?

My experience has been the complete opposite. Literally everyone I know whose lease has been up in 2009 has either moved or negotiated a substantial discount. Granted, most of us moved to NY in 2007, when vacancy was 0.3% and apartments were on the market for a matter of hours, and we have been paying peak prices. The market, at least where I am, has not declined $100 - 200/month. That was last year. This year, the declines are $500 - $1,000/month, factoring in incentives. Only a foolish landlord wouldn't negotiate, and only a foolish tenant would stay.

I'll know more next week, but if my landlord doesn't want to negotiate down to current market rates, then I'll definitely be moving. If the market keeps dropping and landlords remain stubborn, I'll move every freakin' year if I have to. No way I'm leaving $5k or more on the table.

Yeah, last time rents were falling in 2004 and I was in FiDi there was a huge game of musical chairs in FiDi/BPC. Young people without kids will up and move in a heartbeat for a better deal.

....but I can see how in SOME buildings the landlord would gamble.

if the timing works and its in the same building, i definitely agree. but, often not that simple. plus, if kids are involved, the whole thing becomes infinitely more painful.

this analysis makes sense on some level except as the difference between current rent and much lower rents around gets larger (which i think it will) more people will feel obligated to move because they will feel screwed.

also, not everybody renews their lease at the same time and some people move out anyway (to a different state, upgrade to larger apt, etc.) so the difference is not between giving everybody a discount of $5000 and having only 10% replaced, it is much closer and as the landlords realize that, i think (hope) they will come to terms with reality.

i think it is a waiting game (like sales): once the summer comes along and the increase in demand is not what the landlords had expected it to be (firms not hiring, people whose leases are up moving anyway), they might start being afraid to call bluffs and actually negotiate.

One thing to remember: a lot of landlords CAN'T negotiate rents even if they want to: they have so much debt on their buildings that they need a certain income to make their payments. Look, sometimes we think all developers are geniuses and know how to make money in RE.The fact is that the majority over the past 10 years are simply "deal jockeys" who made money because the market went up so far, so fast. just like investing in the Stock market when the Dow went from 4,000 to 14,000 - you bought, you won. Now, you have owners who will lose their buildings if they negotiate rents down, so they'd rather take their chances playing hardball with tenants and POSSIBLY lose them, the mark rents down and KNOW they will lose the building to the lenders (and yes, there is the meta game of the lenders discounting to these owners, so that complicates the issue).

But one thing which often gets left out in this decision is - it costs a lot of money to move in NY especially if you count your time as being worth anything. So a lot of what you "save" by moving to a different building with a lowere rent, doesn't actually make it into your pocket in a meaningful way.

good discussion.found it helpful for insight.

it's simpler than all the above - LL refuses to lower your rent - you stay and pay the high rent or move out - if you move out he charges lower rent to a new tenant, hoping he can jack the rent right up to a higher amount when this lease expires - he can either get the lower rent from a new tenant or the lower rent from you - he loses nothing by you moving out - at least in April '09 - dunno about next year

Answers to user "lad" questions:
LAD said:
Question from LAD: But why would tenants blink? Real-life example: say you're paying $3,750 for a one-bedroom in Chelsea. Your building is offering an equivalent unit (slightly better, if anything) for $3,000/month + one month free. Various other management companies have similarly priced comparable units

Answer to LAD: Because typically the bigger managment companies not only deny current tenants incentives that they offer to new tenants, they also deny them the right to a lateral move to an apartment not only in the same building but within the scope of all the apartments within their management company. . Sometimes they allow upgrades (from 1 bedrom to 2) but never,ever a lateral.

Question from LAD:Even figuring half of that ($500/month difference), are you going to throw away $6,000 just because you don't want to move?

Answer to LAD: No I'm certainly not going to throw away 6 grand. SO I moved. Others obvioulsy don't care as much as I, are riher, have corporate apartment sponsership etc. And yes,I think 9 out of ten people accept in a luxury rental - some are even delighted by no rent increase.

LAD SAID: This year, the declines are $500 - $1,000/month, factoring in incentives. Only a foolish landlord wouldn't negotiate, and only a foolish tenant would stay.
ANSWER to LAD: Hey, I'm trying to make sense out of it too. I'm no fool, I moved. But my landord is no fool either. Money is no object for a lot of people in these buildings but for many tenants there is. If word got out that the landlord was negoitiating, how many people would bluff a move for a lower rent? Not many bet the landord and it seems to be working so far in their favor.

LAD SAID: If the market keeps dropping and landlords remain stubborn, I'll move every freakin' year if I have to.
ANSWER to LAD. Hey I'm on your side too Lad and I'll move every year if a have too and will....

Lowery, Thanks for saying in a few sentances what took my long-winded self many paragraphs.

I think there's a middle ground. Let's use the example from above of an apartment that Renter rents from Landlord for $3750, whereas the market value is $3000. Renter is quite likely to move if the Landlord says $3750, take it or leave it. However, if the landlord says $3200, Renter will most likely stay and avoid the hassle/cost of looking and moving to save the $200/month. And Landlord gets $3200, instead of the $3000 he'd get from a new tenant, plus Landlord avoids having to do work, market the apartment, have it sit empty, offer incentives, etc.

Put very simply, the optimal scenario for both sides is Renter staying, so one would hope that reasonable people in a fair negotiation will achieve that scenario. Whether that's how it will play out, we shall see.

I just went through this (not in NYC but otherwise no different). I was given the choice: stay where I was for same rent, move two doors down (I am not kidding) to an upgraded apartment (same except new appliances, updated kitchen/bath for 15% less, or leave. I left, saving 30% rent/month plus a free month. It cost me less than 1/2 a month rent to move (which I did myself with friends' help). Also, I have a shorter commute to work.

I have never been late with any rent, never get complaints of being loud and basically keep the place nice for 4 years. New tenant? Who knows. I do know the new tenant will be paying $225 less than I did.

Non-anecdotally, the big management firms should have software in place (similar to airlines) that maximizes their return. And just like with the airlines, if you're not paying the least, you're probably upset with them.