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As the market slows down and waves of new development buildings open all at once, rental concessions have been rising at a steady clip for a while now. And that trend doesn't seem to be changing: The January rental market reports are out, and along with some minor price drops, indicate that concessions offerings are continuing to break records.
Concessions offerings in both Manhattan and Brooklyn once again hit all-time highs, according to Douglas Elliman's January rental report, and though median Manhattan rental prices edged up ever-so-slightly (by 0.6 percent), the median "net effective rent" declined by 0.1 percent to $3,259, indicating that once you factor in all the freebies on offer, prices are still deflating a bit.
In Brooklyn, both the median rent and median net effective rent dropped (to $2,750 and $2,702, respectively), continuing a months-long decline. "For the last three or four months we've been talking about record concessions, and the reports are showing consistent patterns for extended periods where rents are slipping, or net effective rents are slipping," says Elliman report author and appraiser Jonathan Miller. "In Brooklyn, concessions have more than tripled since last year. But every month in 2016 has seen huge increases in inventory year-over-year, so it's not surprising that we're seeing this rapid increase in concessions."
In other words, a ton of new apartments have all come on the market around the same time—especially in Brooklyn—and to compete for tenants, more landlords find themselves needing to offer a month or two of free rent to sweeten the deal. (Median rental prices dropped by 2.4 percent in Northwest Queens, as well, though there's not enough data on concessions to determine a definitive trend.)
All of which means that if you're looking for a rental right now, you should really consider negotiating—tips on that process here–to get your rent knocked down a bit; have a free month (or two) thrown in; or at the very least; nab a deal where you don't have to pay the exorbitant first month, last month, and security that's usually expected.
"The way that concessions are being managed is working for landlords," Miller notes. "The vacancy rate isn't rising anymore. But this is not over—I think there's a lot of additional room for [market] weaknesss with all the product coming on. So in 2017, I don't see much change in direction or the use of concessions."
Eventually, Miller notes, landlords relying on concessions may have to drop their asking rents a bit, but that doesn't seem to be happening much just yet. "The tenant gets some benefit, but it's nuanced," Miller notes. "You're getting a discount, but the developer is doing okay, too."
Not great news for anyone who was hoping rents would finally start falling, but on the bright side, a month of free rent is nothing to sneeze at.
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