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It’s never really a bad time to be a landlord in New York City (except the 1970s), but now appears to be an especially good time to own a NYC apartment building. And that means renters are in a tough spot.
The indicators used to gauge the health of NYC’s real estate market are all pointing in landlords’ favor. Douglas Elliman’s February 2019 Rental Market Report for Manhattan, Brooklyn, and Queens shows concessions have fallen for the second month (after rising for 43 straight months), vacancy is low and rents are continuing their upward trajectory.
New leases are also declining, and that’s a sign that “landlords are getting better at lease renewal,” says Jonathan Miller, president of appraisal firm Miller Samuel and author of the report. He calls lease renewals the rental market’s “secret sauce” that's contributing to a decline in vacancies.
Tenants are more likely to renew these days because they see the market tightening and want to avoid the hassle of finding a new apartment and paying for the move, Miller says. They're also finding new competition from buyers.
“More would-be buyers are staying in the rental market until they are comfortable with purchase market conditions in New York City,” says Hal Gavzie, executive manager of leasing for Douglas Elliman Real Estate.
Tenants are also in a weaker position when it comes to freebies. This was the second consecutive month where the share of concessions—typically a month or two free or an owner-paid broker’s fee—was on the decline. (But Miller’s not willing to call it a “trend” just yet. “Don’t get excited,” he cautions.)
While it’s definitely a change in direction, landlords are not yet fully in the driver’s seat, Miller says. Concessions still remain relatively high. In Manhattan, 41.6 percent of all new leases in February came with some kind of freebie. In Brooklyn, that share was 44.7 percent, and in Queens, it was 49. 3 percent.
But “we’re seeing a pivot, tenants don’t have as much control as they recently had,” Miller says.
Unless they’re luxury renters, it seems. Rents are being skewed by larger and more expensive apartments on the market. The average square footage is up 8.7 percent year over year. And the market share of Manhattan leases above $10,000 a month was the second highest in nearly six and a half years. Millers says that this segment represents a surprising 4.2 percent of the market overall.
In Manhattan, rental prices rose and the number of new leases fell year over year for the fourth straight month. The median rent price for February, $3,400, represented a 3 percent increase over February 2018.
The Brooklyn rental market is also feeling the impact of buyers waiting out the slowdown in the sales market. New leases slid 3.8 percent. The median rental price was $2,895, up 5.5 percent. Prices are rising in the starter market.
Queens registered the impact of Amazon’s decision to cancel its HQ2 plans. Both rents and new leases fell for the first time in several months: Rents fell for the first time in four months and new leases dropped 7 percent. Concessions were up but at a slower pace than in the past six months.
Miller says that even though Amazon changed its mind (devastating many brokers), the net effect for the Queens was still beneficial. "The awareness and visibility" the retail giant conferred on Queens as a place to live is helpful, at least in the short term, he says.
In a NYC rental market report from Citi Habitats, Gary Malin, president, says, “Overall, apartment-seekers experienced slightly-higher asking rents—and less available inventory. However, generous concessions are still being offered—especially in neighborhoods with a lot of high-end new construction.”
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