New York City residential landlords are continuing to rely on renters’ incentives to keep vacancies at bay, a trend that is expected to become more widespread throughout 2017.
The number of leases with concessions reached new highs in January, according to the monthly rental report from Douglas Elliman. In Manhattan, 31 percent of all new leases included some form of concession last month, nearly double what it was a year ago. In Brooklyn, 18 percent of leases had concessions, compared to just 5 percent last year.
“Landlords are trying to strike a balance and that means fine tuning rents to fit market conditions,” said Jonathan Miller, CEO of appraisal firm Miller Samuel and author of the report. He predicts landlords will use concessions even more aggressively in 2017.
“I don’t think we’re at the end of this — nothing is changing and there’s a lot of product coming in,” he said. “The rental market is going to get weaker before it gets stronger.”
In Manhattan, the vacancy rate fell slightly from 2.3 percent from 2.8 percent in January 2016. That’s a sign concessions are working, although they are “painful for landlords,” said Miller.
The borough’s median rental price, after concessions, was $3,259, essentially the same as January last year. Softening in the market continues to be particularly acute at the high end. The median rent of a Manhattan studio was $2,600, a negligible change from last year. But for three-bedrooms, the median price was $5,500, a drop of almost 7 percent. While non-doorman median rent went up 2.8 percent to hit $2,800, the median price for doorman rentals fell back 1.2 percent to $3,750.
Luxury rentals, which account for the top ten percent of the market fell again this month, dropping 5.5 percent year-over-year to a median price of $7,595.
In Brooklyn, the effects of vast amounts of luxury rental product is also being felt. The median rent in the borough was $2,702, after taking concessions into account. That’s a fall of 2.8 percent compared to January 2016, when median rent was $2,779. Just like in Manhattan, the lower end of the market held firm or saw modest gains. But the two-bedroom median rental price was $3,025, a fall of 4 percent year-over-year. For three-bedrooms, it was $3,318, a fall of 8 percent. The luxury market dropped just under one percent to $5,119.
“In the last six months in 2016, you started to see a run-up in Brooklyn in the use of concessions,” said Miller. “Even though the concessions are still less than in Manhattan, the amount of concessions tripled over the year, whereas in Manhattan it doubled.”
The market in northwest Queens continues to be “choppy,” according to Miller. The median rent fell 2.4 percent year-over-year to $2,700. Out of all the leases signed last month, 38 percent included concessions. The concessions are driven by the uptick in new development rentals, which had a market share of 34 percent last month, more than double what it was this time last year.