Photo: Anthony Quintano/Flickr
Even with rental prices on the decline in Manhattan, landlords made more concessions on new leases and even increased the size of their concessions last month, according to a newly released report by New York brokerage Douglas Elliman. The report also found that landlord concessions reached a record level in November.
Landlords may try to entice new tenants by offering incentives, also known as concessions, upon signing a new lease. In most cases in New York City, it is a period of not having to pay rent. Last month, the length of the concession was 1.2 months, which was a slight increase from the 1.1 months given last year.
The net effective median rent, or the face rent less concessions, recorded a 1.6 percent decrease to $3,264 from November 2015. This marked the fourth consecutive month of year-over-year declines in the net effective median rental price.
Meanwhile, the median rental price in Manhattan decreased to $3,350 in November from last year. However, the average price recorded a slight 0.6 percent increase to $4,095 over November 2015.
Strong price growth was recorded in the entry market, or lower 30 percent of the market price-wise, where the median rental price rose 2.4 percent to $2,295 from last year. The entry threshold of the luxury market, or upper 10 percent of the market, also recorded strong price growth in November. The median rental price rose 2.6 percent to $6,500 in November for the lower end of the luxury market.
There was a nearly 29.4 percent increase in the number of new leases in November from the same time last year. The listing discount, or the percentage from the listing price to the rental price, increased to nearly 4 percent. This was only a slight increase from the 3.2 percent recorded in November 2015.
Units were on the market an average of 52 days, which was 7 days longer than the same time last year.
The vacancy rate decreased to 2.53 percent from last year’s recorded 2.87 percent, according to the Elliman data. However, a similar market report from Citi Habitats reports that November’s vacancy rate increased to its highest rate in over seven years.
“There remains a disconnect between what tenants can afford to pay, and what landlords believe tenants can afford to pay. Many people are simply at their breaking point. Building owners continue to lean on concessions to drive traffic, but these incentives have yet to lower the vacancy rate as anticipated,” said Citi Habitats President Gary Malin.
He also added that concessions can be a “tale of two markets.” They are usually effective for the terms of the initial lease.
“Those who can afford the apartment — incentive or not — are getting great discounts,” he said. ”However, if a client is on the fence financially, current offers are still giving them pause versus spurring them to act immediately. They are thinking not of the cost of year one when the incentive’s in play — but year two, when it’s off the field.”