Rents: down, down, down...

Manhattan apartment rentals, rents drop steeply

Manhattan’s rental supply soared in the second quarter as new units hit the market and owners postpone their plans to sell because they couldn't get their desired prices.

It’s not just co-ops and condos that New Yorkers are shunning these days. The number of Manhattan apartment leases signed is also tumbling—down 58.3% in the second quarter, according to an inaugural report on the borough’s rental market released Thursday.

read more: http://www.crainsnewyork.com/apps/pbcs.dll/article?AID=/20090709/FREE/907089965

guess what...more units coming

Crain's article link (the one above isn't working):

http://tinyurl.com/mxe89c

Funny... because the apartment we just vacated is now listed for 17% HIGHER than the rate we were paying. (We negotiated 14% off the previous rent of our new apartment.)

The crew at Archstone hasn't gotten the memo either. At the Keywest (96 & Columbus), they're issuing new leases to existing tenants with no discounts and sometimes small increases. Across the street at Park West Village some condo owners are renting comparable apts, with terraces, for 25% less.

We were offered a 6% discount from our current rent, while the other same-size apartments in our building are now renting for at least 10% lower. We will be holding out on our renewal and shopping around for a better deal.

"In addition, “younger people who would have rented found incentives and low mortgage rates and instead bought,” said Dottie Herman, CEO of Prudential Douglas Elliman."

Because Dotty makes a bigger commission on purchases.

What crap. Will they ever cease?

Right on, Dottie, because, um, younger people have suddenly saved up tons of money and banks are now so willing to lend to people with little/no credit histories to purchase over-leveraged depreciating assets. Puhlease!

i would expect that in manhattan, they can earn more money from rentals than sales.

int the current market, the amount of work to show/advertise the sale over and over, prepare board packages, make sure financing is good, etc. will eat away at the profit quickly. with a rental, you show it a few times (hopefully :-), do a quick credit check, the lease is signed and you're done.

Archstone has a problem - they were bought by Lehman and highly leveraged, and they need those very high rents to pay the loans. Much like StyTown & PCV. But the market is priced 50% below them, hence their ever-increasing vacancy rate.

Things will get better when they all declare bankruptcy. Hear about the problems in commercial real estate recently?

"Archstone has a problem - they were bought by Lehman and highly leveraged, and they need those very high rents to pay the loans. Much like StyTown & PCV. But the market is priced 50% below them, hence their ever-increasing vacancy rate.

Things will get better when they all declare bankruptcy. Hear about the problems in commercial real estate recently?"

wow..this is what Ive been wondering about...How is Related situated?

I negotiated a 14% rent reduction for the coming year.

Do your homework. Gather comps. And be prepared to move if necessary. Many landlords will be quite reasonable given the current environment.

Otto...thank you for the post...i've been down all morning thinking should i buy or rent and this confirms....RENT!!!

Still waiting for someone to call me a bitter renter today.

Patience, Julia! Grab some popcorn and just wait a while to REALLY be in a buyers market. Best wishes and good luck!

Cash is king. When interest rates begin to creep up, the bloodletting on the sales side will really begin in earnest. So rent, stash away some cash and wait for the shitshow to begin in earnest.

Our neighbor in a very nice one bedroom, mid town east, post war, high rise, doorman bldg, with great view, negotiated the rent from $3,400 to $2,700. He deserved it though, as the last three years, he was paying $300 a month more than us, with an identical unit. Market is very soft, especially if your a tough negotiator.

nyc10022,

Don't say that, your fans will be here to revive the thread dedicated too bashing you.

"The crew at Archstone hasn't gotten the memo either."

Clearly Carlyle Construction Corp (buildings all over the UES and midtown) hasn't gotten the memo either!!!! They're listing 2 bedroom/ 2 bath for $5500 with old parque floors and kitchens from the 1970's. How can they get away with this?? No wonder so many of their apts are sitting vacant for 8-12 months at a time!!!!

"nyc10022,

Don't say that, your fans will be here to revive the thread dedicated too bashing you."

Just another sign of success, I guess.

nyc10022,

You are too good for that ;o).

"younger people have suddenly saved up tons of money"

You're wrong, they have.

From the payouts they got from the law firms for NOT showing up to work at the jobs they were promised after graduating Law School. ;)

ha.

from the crains -

"The number of Manhattan apartment leases signed is also tumbling—down 58.3% in the second quarter"
"Average per-square-foot rents fell 17.5% compared with the same quarter of 2008, hitting $44.16, the report said. "

30yrs_RE_20_in_REO

"younger people have suddenly saved up tons of money"

You're wrong, they have.

From the payouts they got from the law firms for NOT showing up to work at the jobs they were promised after graduating Law School. ;)
_____________

Well put

Got It, Thanks: Leases in Manhattan's Doorman Buildings Plunge

New rent stats suggest that doorman buildings are starting to go out of fashion for the masses as Manhattanites seek to cut back on expenses—even if it means having to hoof their own packages upstairs.

The number of new leases for apartments in doorman buildings dropped 63.2 percent annually in the second quarter of 2009, while apartments not armed with service teams saw a less marked year-over-year drop (47.7 percent) and a 58.2 percent increase in new leases from the first quarter. The stats come from Miller Samuel and Douglas Elliman’s inaugural Manhattan rental market report (PDF), released Thursday. The number of new leases for non-doorman apartments jumped to 943 from 596 in the first quarter.

This is bad news for doormen, who have already seen their tips dwindle and jobs disappear. They provide a number of amenities: taking care of the laundry, bringing tenants’ packages upstairs, helping carry tenants’ bags, and often walking tenants’ dogs and keeping an eye on the kids—and getting all up in the business of some tenants as well. Your friend with a drinking problem is sleeping on the futon? Girlfriend isn’t coming around anymore? Big party last night? They know.

But, apparently, the renters of 3,820 apartments in the second quarter of 2008 embraced the intrusion, when the economy was faring better. Now that it’s become clear this is not your uncle’s recession, there were only 1,406 new leases in doorman apartments in the same period in 2009, down also from 1,674 in the first three months of the year.

Each doorman costs around $80,000 ($37,315 in salary, plus overtime, benefits, training and other expenses), according to a 2006 Times article. That means higher rents in apartments that are already likely to be pricier for related reasons—like a better location, taller building, and larger density of three- and four-room lofts, according to Jonathan Miller, president and CEO of Miller Samuel and the rental report’s author.

While doorman apartments currently cost $50.36 per square foot, non-doorman apartments cost $34.59, according to Mr. Miller, a 45 percent differential.

OVERALL LEASING WAS DOWN 58.3 percent from 2008, and rents per square foot were down 17.5 percent—in large part because new renters aren’t entering the market (since they can’t find jobs), and also because laid-off workers are leaving the market, Mr. Miller said.

But all is not lost: Leases actually increased over the first quarter by 2.4 percent, and leasing activity even picked up in June: 46.3 percent of all second-quarter leasing activity happened in June, a steady rise from 20.4 percent in April and 33.3 percent in May. Usually, according to Mr. Miller, such leasing activity is more evenly distributed over the spring months.

Meanwhile, non-doorman apartments may become the new trend in a recession that Mr. Miller said is not ending anytime soon—though he stopped short of saying non-doorman apartments are the new thing. “We had a significant surge in non-doorman rental activity,” he said. “I’m not sure that that will be sustained, given one quarter is not a trend.”

Still, we’ll take it.

Mr. Miller added, “You might continue to see less of a decline in rents or the demand for rents at the lower end of the market as the economy remains weak.” And most non-doorman apartments, Mr. Miller granted, are at the lower end of the market.

http://www.observer.com/2009/real-estate/i-got-it-thanks-leases-manhattans-doorman-buildings-plunge

Manhattan Real Estate More Mental Than Rental

Although the Manhattan the real estate sales market has long been a full-blown spectator bloodsport worthy of an X-Games-like nightly television special, the rental market has patiently remained in the background, a cerebral cousin who stays home and plays it safe.

The rental market is much more responsive to changes in economic conditions, especially rising unemployment. Many firms are cutting back on hiring or are downsizing. In better times, new hires were a key driver of the rental market as new employees often rent first, then buy.

Many spectators incorrectly assume that the falling sales market would yield a rising rental market, that would-be purchasers become renters as credit went sour. After all, our second quarter market sales report showed a 25.6% year-over-year decline in resale apartment prices and a 50.3% decline in the number of sales. Therefore the rental market should jump, right?

But there's more to this. The modest 8.7% rise in sales inventory over the same period reflected the emergence of "shadow inventory" as a two-tiered formidable market phenomenon. This inventory type is comprised of apartments ready to be listed for sale but are withheld because of weak market conditions.

Many individual sellers who would throw their apartment onto the market at a price they demanded, opted to wait until the housing market improved. This had the effect of keeping the pace of rising sales inventory in check, but raising the probability that sales inventory at some point in the near future, would suddenly become bloated.

The more serious form of "shadow inventory" relates to new development and it is rising. A developer does not usually offer up all available units for sale as a marketing technique to create urgency. For a 150-unit condo, a developer might offer 50 units for sale initially and as those units sell out, release additional blocks of units until all units are eventually sold.

What happens if the initial block of apartments do not sell out?

A significant backlog has developed market-wide as new buildings enter the market and aren't being absorbed. As a result, a large number of units that are completed or nearing completion, have accumulated behind the public view. By some estimates, there are about 7,000 of these condos units in "shadow inventory" and growing. Add them to the 5,000 condo resale and new development listings formally on the market and there are roughly 12,000 condos to sell in Manhattan.

At a post-Lehman bankruptcy pace annualized pace of 3,200 condo unit sales per year, it would take 45 months to absorb all condo listings, 5 times more than the 9-month average absorption rate of the last decade.

Enter the rental market. That's got to be in better shape, right?

Developers and banks holding construction loans on new projects will likely be forced to rent out the remaining units on the rising number of stalled new development projects adding to the rental inventory. If the developers are foreclosed, the banks -- many of those have serious balance sheet pressures--will need to stem their bleeding by renting out the remaining units until they can sell them off. Individual sellers who need to sell but can't or won't sell at a loss, opt to rent out their apartments. Rental inventory continues to rise and rental prices fall.

We just released our rental report for the second quarter and the results sounded vaguely familiar to the sales trends. Rental inventory is rising at a 28.8% clip. There was a 17.5% year over year decline in rental price per square foot and a 58.3% decline in the number of new rentals.

One of the key culprits for the rental price and activity drop was the record low mortgage rates in the spring, which pulled many first time buyers out of the rental market (if they could qualify under the banks newly-found underwriting conservatism). Combine that shift with rising unemployment and there is less activity and downward pressure on rental prices.

One could therefore argue that the rental market is a leading indicator for the purchase market, at least in Manhattan. When the economy improves and the pace of unemployment begins to ease, the number of rentals should begin to rise, eventually followed by sales activity.

In other words, Manhattan real estate is more mental than rental.

http://www.huffingtonpost.com/jonathan-miller/manhattan-real-estate-mor_b_229361.html