With demand for units shrinking, rents slip nearly 8%—and that's not even including landlord concessions such as months of free rent and help with security deposits. http://www.crainsnewyork.com/article/20091008/FREE/910079987 Rising unemployment and an increase in purchases by first-time home buyers have combined to diminish the number of new apartment leases signed in the third quarter to levels... [more]
With demand for units shrinking, rents slip nearly 8%—and that's not even including landlord concessions such as months of free rent and help with security deposits.
http://www.crainsnewyork.com/article/20091008/FREE/910079987
Rising unemployment and an increase in purchases by first-time home buyers have combined to diminish the number of new apartment leases signed in the third quarter to levels 58.9% below those of a year earlier, according to the latest Manhattan rental market report, released Thursday.
During the quarter, there were 2,549 rentals, according to Prudential Douglas Elliman and appraisal firm Miller Samuel Inc., which conducted the report.
“We saw a significant decline in rental activity from last year,” said Jonathan Miller, chief executive of Miller Samuel.
Meanwhile, the median rental price in the third quarter slipped to $2,950, down 7.7% from year-earlier levels. The drop is likely even deeper than the numbers show because more and more landlords now offer sweeteners like months of free rent and help on the security deposit, concessions that are not reflected in the rent numbers.
In a separate third-quarter report issued earlier this week by CitiHabitat, the city's largest rental brokerage, the firm noted average rents may be down by five to seven percentage points more after factoring in those concessions. The brokerage underscored that the level of concessions varies hugely from neighborhood to neighborhood.
“We knew rental prices had to come down given the economy,” said Gary Malin, CitiHabitat's president.
Overall apartment vacancy rates in Manhattan notched up to 1.8% in September from 1.4% the same time last year, according to CitiHabitat. But Mr. Malin noted that the vacancy rate is not as high as many had feared it would be after last year's collapse of Lehman Brothers and the chaos in the financial markets.
“Landlords have been smart to react to market conditions,” he said. “And Manhattan remains a place people want to gravitate to.”
Nonetheless, the inventory of unrented apartments expanded 5.4% to 6,527 apartments in the quarter, according to the Douglas Elliman/Miller Samuel report. That number is expected to grow as unemployment continues to rise, Mr. Miller said. New York City's unemployment rate recently hit 10.3%, currently above the national rate of 9.8%.
These days, it is also taking longer to find rental tenants. Rental apartments are on the market for 77 days compared to 50 days this time last year, according to the report.
“We are looking at a weak rental market over the next year,” Mr. Miller said. “There will also be issues with condo units that weren't intended to be rental that now are.” Those units will further add to the rental stock.
[less]
Response by modern
over 16 years ago
Posts: 887
Member since: Sep 2007
5% city-wide vacancy looking more and more possible. (boroughs always much higher than Manhattan)
Ignored comment.
Unhide
Response by aboutready
over 16 years ago
Posts: 16354
Member since: Oct 2007
there's also a huge amount of shadow inventory here. those huge towers that have just been constructed are nowhere near filled, and they certainly haven't "released" all of the units onto the market yet.
Ignored comment.
Unhide
Response by LP1
over 16 years ago
Posts: 242
Member since: Feb 2008
I can't believe rents are down only 8%. My collegue is looking for a 1bd and he's seeing 20% down. We renegotiated our existing rent for @12% down.
Ignored comment.
Unhide
Response by nyc10022
over 16 years ago
Posts: 9868
Member since: Aug 2008
ha, you beat me by a minute...
Ignored comment.
Unhide
Response by aboutready
over 16 years ago
Posts: 16354
Member since: Oct 2007
LP1, the way i understand it your renegotiation wouldn't count as your unit never reentered the market. it's a very flawed report. nor would concessions. i don't know if it even counts if a large landlord never lists a unit but rents it to a walk-in customer. is this based on a survey?
Ignored comment.
Unhide
Response by notadmin
over 16 years ago
Posts: 3835
Member since: Jul 2008
only market rate leases are included? or rent stab too?
Ignored comment.
Unhide
Response by alanhart
over 16 years ago
Posts: 12397
Member since: Feb 2007
Good question...?
Ignored comment.
Unhide
Response by 30yrs_RE_20_in_REO
over 16 years ago
Posts: 9897
Member since: Mar 2009
"The drop is likely even deeper than the numbers show because more and more landlords now offer sweeteners like months of free rent and help on the security deposit, concessions that are not reflected in the rent numbers."
This is extremely important. A week or two ago I noted that if you look at the difference between someone signing a 2 years lease and paying a 15% broker's fee, vs the same 2 year lease where the landlord pays the borker a month and give the tenant a month free, the decline in total $ is HUGE.
Example 1: $2,000/month X 24 months + 15%(1 years rent) = net effective rent to tenant 2,150
Example 2: ($2,000 - 7.7% decrease in gross rent)/ month X 24 months - 1 month free rent - 1 month brokers fee = 1,692.16
That's a real decrease of 21.3% (although it's a bit of double counting/shared discount in that it's not like the landlords are losing all of the 21.3% or tenants are getting all of it. The pain is being shared by the broker and landlord (much more the LL) and some of it is in gain to the tenant). But in terms of gross dollars being spent, that's the bottom line difference.
Ignored comment.
Unhide
Response by 30yrs_RE_20_in_REO
over 16 years ago
Posts: 9897
Member since: Mar 2009
"only market rate leases are included? or rent stab too?"
I'm sure in the vacancy rate they are counting ALL apartments, not just "free market".
"I can't believe rents are down only 8%. My collegue is looking for a 1bd and he's seeing 20% down. We renegotiated our existing rent for @12% down."
remember they are talking market averages, which i always say are/can be misleading. Perhaps there are a higher percentage of higher dollar rental deals being done due to people renting rather than buying a lot of the new inventory (i.e. units bought to flip couldn't, ended up renting, the numbers were about the overall average, so it moves the average up). Remember, they aren't talking about the rental price of "an apartment", they are talking about what the median price is of all units rented. You can easily have prices coming down and the median going up if the mix changes substantially.
But I will add that I find it hard to believe that volume could be down a whopping 59% and pricing only going down 8% for too long, especially with inventory GROWING at the same time.
Ignored comment.
Unhide
Response by 30yrs_RE_20_in_REO
over 16 years ago
Posts: 9897
Member since: Mar 2009
"Overall apartment vacancy rates in Manhattan notched up to 1.8% in September from 1.4% the same time last year, according to CitiHabitat."
Another number I have a hard time swallowing, except that it's probably TOTALLY skewed by RS/RC units. If it were only market units, I'm sure the numbers would look VERY VERY VERY different.
Ignored comment.
Unhide
Response by nyc10022
over 16 years ago
Posts: 9868
Member since: Aug 2008
"I can't believe rents are down only 8%. My collegue is looking for a 1bd and he's seeing 20% down. We renegotiated our existing rent for @12% down."
No, no.. thats the YoY. Things were already down last year, so the total decline is compounded. Remember, rents started falling before prices.
5% city-wide vacancy looking more and more possible. (boroughs always much higher than Manhattan)
there's also a huge amount of shadow inventory here. those huge towers that have just been constructed are nowhere near filled, and they certainly haven't "released" all of the units onto the market yet.
I can't believe rents are down only 8%. My collegue is looking for a 1bd and he's seeing 20% down. We renegotiated our existing rent for @12% down.
ha, you beat me by a minute...
LP1, the way i understand it your renegotiation wouldn't count as your unit never reentered the market. it's a very flawed report. nor would concessions. i don't know if it even counts if a large landlord never lists a unit but rents it to a walk-in customer. is this based on a survey?
only market rate leases are included? or rent stab too?
Good question...?
"The drop is likely even deeper than the numbers show because more and more landlords now offer sweeteners like months of free rent and help on the security deposit, concessions that are not reflected in the rent numbers."
This is extremely important. A week or two ago I noted that if you look at the difference between someone signing a 2 years lease and paying a 15% broker's fee, vs the same 2 year lease where the landlord pays the borker a month and give the tenant a month free, the decline in total $ is HUGE.
Example 1: $2,000/month X 24 months + 15%(1 years rent) = net effective rent to tenant 2,150
Example 2: ($2,000 - 7.7% decrease in gross rent)/ month X 24 months - 1 month free rent - 1 month brokers fee = 1,692.16
That's a real decrease of 21.3% (although it's a bit of double counting/shared discount in that it's not like the landlords are losing all of the 21.3% or tenants are getting all of it. The pain is being shared by the broker and landlord (much more the LL) and some of it is in gain to the tenant). But in terms of gross dollars being spent, that's the bottom line difference.
"only market rate leases are included? or rent stab too?"
I'm sure in the vacancy rate they are counting ALL apartments, not just "free market".
"I can't believe rents are down only 8%. My collegue is looking for a 1bd and he's seeing 20% down. We renegotiated our existing rent for @12% down."
remember they are talking market averages, which i always say are/can be misleading. Perhaps there are a higher percentage of higher dollar rental deals being done due to people renting rather than buying a lot of the new inventory (i.e. units bought to flip couldn't, ended up renting, the numbers were about the overall average, so it moves the average up). Remember, they aren't talking about the rental price of "an apartment", they are talking about what the median price is of all units rented. You can easily have prices coming down and the median going up if the mix changes substantially.
But I will add that I find it hard to believe that volume could be down a whopping 59% and pricing only going down 8% for too long, especially with inventory GROWING at the same time.
"Overall apartment vacancy rates in Manhattan notched up to 1.8% in September from 1.4% the same time last year, according to CitiHabitat."
Another number I have a hard time swallowing, except that it's probably TOTALLY skewed by RS/RC units. If it were only market units, I'm sure the numbers would look VERY VERY VERY different.
"I can't believe rents are down only 8%. My collegue is looking for a 1bd and he's seeing 20% down. We renegotiated our existing rent for @12% down."
No, no.. thats the YoY. Things were already down last year, so the total decline is compounded. Remember, rents started falling before prices.
steveF ?
(crickets, crickets)