Expect 4-5mo free come Winter

Re the USQ unit: I'm sort of astounded at the asking price for an "Oversized 1 Bedroom". Oversized compared to *what* exactly? Looks pretty normal sized to me (maybe even a bit undersized). And the kitchen photo does not match the floorplan, so who knows just what you're renting here. But this is the listing that also touts USQ as "a park that adds splendor to urban life", which tells me that the writer really hasn't spent much time in USQ park.

Aaron, I am always shocked at what people are willing to pay for 1USQ South. Apartments are small. 1BR 600-650 sq ft and 2 br below 1000 sq ft. They manage to get $8-9 per sq ft per month in this market. It basically shows that renters don't really look at the square footage as much as number of bedrooms if the location is prime.

Don't you think it's a bunch of NYU kids?

@stache - exactly
It's called paying rent with OPM - Other (Mom&Dad) People's Money :-)

There are very few, if any, NYU kids there. I see people going in and out from the building from time to time. Most seem like working professionals. I am sure there are some trust fund grown ups too.

Meandering article with some interesting tidbits:

https://www.nytimes.com/2021/12/31/realestate/in-2021-new-yorks-housing-market-made-a-stunning-comeback.html

In January 2021, the median asking rent in Manhattan, including concessions, sank to its lowest price during Covid, $2,750 a month, a more than 21 percent drop from the same time the previous year.…

In November, the median rent in the borough shot up to $3,475 a month, 24 percent higher than it was during the same period in 2020, and just below the prepandemic price of $3,500 in the same month of 2019.

The shift was shocking for Emiliya Zhivotovskaya, the chief executive of the Flourishing Center, a well-being training company. For a 950-square-foot, two-bedroom apartment with a large outdoor space on the Upper West Side, she agreed in late 2020 to pay $5,000 a month — $800 less than the landlord sought earlier in the year. But when her one-year lease ended in December, she said her landlord raised the rent to $7,500 a month, a 50 percent increase, and tried to shorten the lease term to three months. (The apartment is in a condo building that is not rent stabilized.)

“I gasped,” she said, adding an expletive. “It was just so stressful.”

She negotiated the rent to $7,000 a month, a 40 percent jump, and was able to keep the one-year lease, she said, but “it left a sour taste in my mouth.”

Illustrative of how the 20% drop in asking rents were: there was another 15% to be negotiated, which in my experience at this price point, is unusual in typical times.

Man, I am in the wrong business when the founder of a continuing ed and 'wellbeing' coaching firm is able to pay $7000/month for a 1br (even with 'a large outdoor space'). Wonder how that sour taste in her mouth goes with her positive psychology?
https://www.linkedin.com/in/emiliya-zhivotovskaya-mapp-1b770315

Good articles Ino. The NYTimes always seems to put rose-colored glasses on, in my opinion, because they rely on real estate listing business from the brokers (among other pro-NYC factors)

I've found EQR and Avalon Bay to provide weird case studies historically -- their reported occupancy and pricing never seems to "foot" with the anecdotes that we see in the market. Probably bc their locations tend to be prime (maybe except for some of the Midtown / lower UWS stuff) and their buildings are generally also on the upper end for rentals. The servicer reports for some very new properties in marginal areas showed way worse deterioration in both occupancy and asking rent -- my guess is that the overall market is probably somewhere in between

Non prime area. Still a little cheaper than 2019. Not sure for how long.
https://streeteasy.com/building/murray-hill-tower/08h

>> Man, I am in the wrong business when the founder of a continuing ed and 'wellbeing' coaching firm is able to pay $7000/month for a 1br (even with 'a large outdoor space').

It’s a 2BR.

I don’t get it personally, but wellness is a thing for a lot of people. If some people are willing to pay for it, and others are willing to provide it, well that’s all there is to an economy.

I also wouldn’t be surprised if the article is only showing you one half of the tenants. You can imagine the other half not wanting their names plastered on the NY Times so the peanut gallery can make snide remarks about them. (Not discouraging your snide commentary, comes with the territory of going on record with a RE article if you ask me.)

300, that building currently has 16 apts for rent out of 270. Over the last 3 months, exactly 16 listings went away. Let’s assume they rented. Not exactly a great trajectory for increasing rents. By comparison, they rented 13 apts at the peak in July.

I am so surprised by that Murray Hill EQR building. I live not far away, and don't think I saw such prices in other buildings. $7k for a 2br? I don't think I follow. A gym and a swimming pool are worth maybe extra $300 per month. But I am pretty sure there are apartments of that size in and around Tudor city for $5.5k.
They also list a 1br that is more like a large studio for $3840 per month - what are they thinking?!?!? https://streeteasy.com/building/murray-hill-tower/34a

On the same intersection, opposite corner, building with a gym and a swimming pool, a much larger 1br for $3495 https://streeteasy.com/building/the-churchill/15x

SE now shows it as 16=>18 listings (out of 270 apts), removing 2 “No longer availables” from Dec. so that makes it 18 current listings vs 14 rented in the past 3 months. And the last ones rented were a full month ago.

I suspect they have a vacancy rate target 4-5% depending on the month. Also, their pricing algo seems to adjust prices too frequently and will too small of increments. Perhaps they try to signal the rents are fair every day!!

$3495 https://streeteasy.com/building/the-churchill/15x seems to come

This one is rental from a condop building (if it's rented from a coop shareholder, it is called a sublet). There might be a lengthy application compared with a rentable building.

Most coop apartments sublet has a good discount compared with a simple rental building due to various restrictions (limit on the maximum number of years and subject to be the annual renewal by the board).

There's a lot to unpack here, but who won the proverbial drink on nadas terrace?

I think I won the proverbial drink on nada’s terrace. The rental market bottomed in winter 2020, as I had called it. My prize has been actual drinks on nada’s proverbial terrace. I fear my payback will be eventually going back to paying “full fare” via skyrocketing rents or *gasp* actually buying…

Cheers!

Looks like we might be going back??? 5 months free on 12 month lease, or 8 months free on 18 month lease!

https://streeteasy.com/building/the-copper/w48b

Looks exponentially more expensive than other similar units. Just based on a quick review. Seems like the net effect of rent is actually where they should be priced? I don't feel like trying to calculate square footage, what are your thoughts 300?

I calculated 1580 interior sq ft, plus 140 exterior sq ft. If we half-count the exterior, works out to 1650 sq ft. At the 18-month rate, it's $104 per sq ft per year. Not a bad price in a rental building for a premium unit on a high floor w/ high ceilings. But it is in the boonies...

I'm mostly entertained by "Net Effective" being 55% of face rent.

The purchase of this building in Dec 2021 at ~$850M seems ill-timed, particularly as it was financed with $675M in loans that average SOFR + 3.1%. They got into the deal thinking they'd pay 4% plus or minus, or $27M/yr. It's now looking to be 7.5%, or $51M/yr. And clearly, they're having trouble finding tenants at face rent.

https://assets.ctfassets.net/dqx4ywg83raq/58SCY8DdcQ4u027yqJ8kc5/d917226230d853d9b3fa871988bcd1d4/393465.pdf

The table on page 15-16 is illuminating. In 2021, concessions were ~10% of base rent. Currently, the typical listed unit offer ~20% concession (4 months on 18 months). And they were 21% vacant in 2021.

Even the rosiest NCF analysis, with 3% vacancies and 3% concessions, puts net cash flow at $42M/yr. In 2021, actual net cash flow was $29M/yr.

Tax liability would have been $15M/yr higher were it not for 421-a. That starts phasing out in 7 years, over the subsequent 8 years....

$51M/yr in interest payments: no bueno...

I'm seeing an increase in units on the market but not "officially listed" and an increase in vacant units not being listed at all, in addition to the almost 90,000 Rent Stabilized apartments being held vacant on purpose.

Some very smart money (like Sam Zell, Heller, Solow) have been sellers on apartment buildings in NYC at prices based on the hottest rental market and lowest interest rates in history. And the buyers have largely been debt cowboys.

@30 - Who is going to be this cycles Jared Kushner?
Hopefully they have FIL in high places too

Looking back to early in this thread, perhaps 30yrs was right after all. One year off, but here we are looking at 8 months free. And I thought I was making a ridiculous joke. Silly me.

inonada>> Perhaps 30yrs will be right, I’ll even be happy if he is right. But why would that article be supportive of next winter over this winter? If the quote you pasted indeed plays out and LLs are offering 4-5 months free this winter, what happens next winter — they start doing 7-8 months free?

@nada so are you saying you think rents will bottom this winter??

No, not this winter. There is a lot of inventory building up right now. SE had 10K listings going into the summer, and now it’s up to 15K. It feels like where the sales market was at ~6 months ago. Inventory isn’t moving, but many are holding out for top dollar. A few are peeling away, after sitting for months. The above unit at The Copper is a prime example: originally, it was 0 or 1 month free, I think.

As one datapoint at the high-end, I probably saw ~20 places in this round of looking. I think you know me well enough to understand that the ~20 were amongst the most attractive properties city-wide in my price level. Of these ~20, I think only 2 of them will have closed on a tenant for this month: the one I’m taking and one other one. The rest did not seem to have anybody showing serious interest. Even the two that found a tenant only had one serious interested party.

In all but one case, there was softness in the asking rent — either in the response to our bid, or in the broker encouraging a bid on properties we did not bid on. In the one case, they were not willing to even consider anything less than their ask, but that was the exception. At the other extreme, there was one other place whose ask was perfectly reasonable, but then they dropped yet again to a super-attractive ask. Unfortunately, it was smaller than what we’d like, so we had to pass. Unlike all other times I’ve been in the market, there was little to no discount (relative to buy) on higher-prices units, which was interesting.

So it feels like a transitioning market, and next winter will likely be lower than this winter. Will it bottom next winter or in the next year? I’m not sure. Will it reach winter 2020 rents? Not even close, I would wager.

That said you're sort of looking at the 1% of the 1% market. We've got a place coming on the market soon for rent in Tribeca, newer building, 18th floor about 1300 ft. Will probably be coming in at about 9.5k.

The last listing we had over the summer at the Edge in Brooklyn at this price point received 13 offers... Be interesting to see where this new one goes.

This shows the disconnect between lower prices and higher priced rentals (higher $ rentals also cheaper in $ per sq ft) but the rents seems to be certainly softer vs a few months. At this point of time, one could blame it mostly on the seasonality.
https://streeteasy.com/building/prism-at-park-ave-south

And pretty funny that in at least 3 of the Prism listings I browsed, there are lots of photos of various units (and of course all the amenities) but based on the floorplans shown, not of the actual units.

I've pretty much given up on rental or sale listings depicting any sort of actual reality of the space being offered. They may as well show pictures of Mrs. Astor's ballroom.

Usually rental buildings do not show picture of actual units but sales listings are mostly fine when it comes to the condition of the apartment. Virtual furniture and paint color change is fine as you are not really buying the furniture.

Keith, send me the info on the Tribeca apt when you are able, please.

300, I think it’s more than seasonality. Note this listing is asking 5% less than what it was asking almost exactly a year ago:

https://streeteasy.com/building/prism-at-park-ave-south/12c

This higher-end one is at its June 2021 ask, and ~10% below its winter 2015-2016 ask:

https://streeteasy.com/building/prism-at-park-ave-south/21h

Shouldn’t have gotten greedy with a 30% bump over its summer 2021 ask, which was already in a pretty warm market.

While it would still be a "one off" (and in allegedly the hottest neighborhood for rentals currently) this could throw off some information:
https://streeteasy.com/building/111-greenwich-avenue-new_york/2a

Wait, what? I believe I was in that unit on Greenwich and Jane with clients earlier this year.

What do some of these Equity Residential listings mean when they say "421a surcharges apply"?