Photo: Robert Clark
Over the last few months, the use of incentives by landlords to attract new tenants has been doubling compared to the same time last year, and have mostly kept Manhattan’s rents stable.
However, incentives may not be enough to keep rents from falling and the borough’s vacancy rate from rising, according to a report released today by New York brokerage Douglas Elliman.
In September, the percentage of leases that included incentives nearly doubled from last year from 15 percent to 27 percent.
Landlords use incentives to lure new tenants, thus keeping units occupied, which in turn keeps the borough’s vacancy rate in check. Incentives generally include a period of free rent, but landlords have begun to get more savvy by offering high-tech bait like Netflix and Hulu subscriptions.
The average incentive in September was 1.2 months free rent, virtually unchanged from August.
And although Jonathan Miller, CEO of the appraisal firm Miller Samuel, Inc. and author of the Elliman report, doesn’t expect incentives to rise, the next step for landlords will be to cut prices.
“Landlords will have to cut face rent to keep vacancy under control, plus tenants are leery of high concessions because they don’t want to be in the position of not affording a renewal if the concessions are not continued,” Miller tells BuzzBuzzNews.
Yet, despite the increased use of incentives in September, Manhattan’s vacancy rate rose annually for the second consecutive month to 2.6 percent — after falling earlier this year.
Listing inventory decreased for the second time in three months, after rising for nearly two years. There were 7,363 apartments for rent in September, 0.4 percent fewer than last year.
Slipping inventory isn’t likely to become a trend in the foreseeable future.
“It is unlikely to inventory slip anytime soon. There is a a lot or product coming through the pipeline now. I think we look at the oversupply of high end rentals in the context of the next few years, not months or quarters,” Miller tells BuzzBuzzNews.
Meantime, the number of new leases fell annually to 4,684 in September, down almost 11 percent from last year “as affordability pressures rose.” This was the first annual decline in six months.
Manhattan’s median rent remained stable at $3,400, but the average rental price declined 0.6 percent year-over-year to $4,094 last month. Although prices remained fairly stable, the average rental price per square foot dropped 3.6 percent to $65.45.
The listing discount, or the difference in price from listing to lease signing, slipped from 2.8 percent last year to 2.6 in September.
Manhattan apartments were on the market for an average of 43 days in September, one day fewer than the previous year.
Click here to read the entire report.