Photo: Robert Clark
Increased landlord incentives and falling rents were enough to stave off affordability pressures and attract new renters to Manhattan in October.
But while the number of new leases rose annually, the borough’s vacancy rate continued to rise, according to a new monthly report released today by New York brokerage Douglas Elliman.
The number of new leases jumped 13.2 percent from last year in October, but was down 2.2 percentage points from the previous month. The share of new leases with landlord incentives rose to 28 percent, up 4 percentage points from last year.
Landlords use incentives as a tool to attract new renters and keep units from remaining unoccupied. Incentives tend to be a period of free rent, but can also include more creative lures like Netflix subscriptions or Amazon gift cards. The average incentive in October remained stable at 1.2 months of free rent.
After falling in the spring, Manhattan’s vacancy rate rose to 2.47 percent — the third consecutive month of year-over-year increases, and the highest October reading in 11 years.
Average prices slipped 2.6 percent from last year to $4,113, while median rents remained unchanged at $3,400.
Over the last several months, rents in Manhattan have cooled. But for many Manhattan renters, affordability challenges have remained.
“Because development costs remain so high, particularly land, developers have been unable to develop across all price points, in other words, affordable housing. With rental development skewed to the upper half of the market it has become over supplied and is seeing discounts and concessions,” Jonathan Miller, CEO of the appraisal firm Miller Samuel, Inc. and author of the Elliman report, tells BuzzBuzzNews.
The rest of the market is seeing supply remain static, but the population continues to increase and job gains are bringing in tenants into the market segment, Miller adds. As a result, the Manhattan market is “soft at the top and tighter in the lower segments.”
And although it may seem like prices in Manhattan have hit the ceiling of what New Yorkers can realistically afford to pay, Miller disagrees.
“I have described 2015 as the point we hit some sort of affordability threshold whether it related to sales or rentals. It was measured in the sudden rise in suburban home sales as renters moved out of the city to become first-time buyers,” Miller tells BuzzBuzzNews.
Looking forward to both the end of the quarter and the end of 2017, don’t expect to see any dramatic changes in the Manhattan market.
“There is a lot more rental development in the pipeline, so I see more of the same: heavy use of concessions, high rents with price declines more apparent towards the higher end of the market,” Miller tells BuzzBuzzNews.
Click here to read the entire report.