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With the rental market finally at a high-priced breaking point, concessions have been on the rise for quite some time now. And it would seem they're doing their job: according to the latest round of market reports, rents have largely stagnated, but vacancy rates are down, meaning that more renters are being lured in by concessions and filling apartments that had been sitting empty.
To wit: the Citi Habitats May rental market report for Manhattan showed the borough's vacancy rate falling to 1.58 percent, its lowest level since August 2015. Meanwhile, there was a slight monthly drop in the share of rentals offering concessions such as a free month's rent (22 percent of transactions in May, compared to 28 percent in April), but they were still up year-over-year, compared to 17 percent in May 2016. "The vacancy level is close to where it was two years ago, which is a sign that there is a lot of demand, and the level of concessions are helping absoprtion," says Citi Habitats president Gary Malin.
"It's still priced high, but there's negotiability, to some degree, and concessions are out there," he adds. "There's great demand out there, but when you look at incomes versus rents, it's tight."
Douglas Elliman's May report told a similar story, indicating that Manhattan's vacancy rate fell below two percent for the first time in two years. But while median rents increased slightly in Manhattan—by 2.2 percent—that's more a function of a few ultra-high-priced rentals hitting the market than a larger upswing from the recent slump. "The number of new leases for apartments priced at $15,000 per month or more almost doubled," says Miller Samuel's Jonathan Miller, author of the Elliman report. "It skewed the upper half of the market, which skewed the median. Rents aren't really rising, there's just a larger swath of high end units in the mix."
Meanwhile, median rents in Brooklyn dipped by 1.9 percent, and Miller explains, "Brooklyn kind of showed what Manhattan would have seen if we didn't have this surge in high-end activity." And while concessions in both boroughs have been setting new records recently, they didn't in May, a sign that the incentives are effectively luring in renters.
"You could say concessions are working well in managing vacancy—they're doing what they're supposed to do," says Miller. As such, he doesn't expect concessions to rise much over the next several months, but Malin says, "It will be interesting to see what happens next month with vacancy and concessions, as owners feel bolder and start testing the waters."
In the meantime, if you're on the hunt for a rental, don't be shy about asking for concessions, or trying to negotiate a better deal. "There's negotiability to some degree, and concessions are out there," says Malin. "I think right now it's kind of an equilibrium between an owner's versus a renter's market, and both sides are happy to transact. It'll be interesting to see where it goes."
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