Photo: Robert Clark
Record numbers of NYC landlords used incentives to lure new renters in December.
However, the results were decidedly uneven as Manhattan recorded an increase in new leases while Brooklyn and Queens saw steep declines, according to a report released today by New York brokerage Douglas Elliman.
The use of incentives by landlords has been trending high all year throughout NYC, but it was still “interesting” to see new records set in the three boroughs.
In Manhattan, the net share of new leases that contained incentives was 36.2 percent in December, up from 26.4 percent recorded last year. And at the same time, the market share of landlord incentives more than tripled from 13.7 percent to 46.1 percent in Brooklyn and rose nearly 20 percent to 50.2 percent in Queens.
“The incentive market share analysis between new development and existing rental showed that on a year-over-year basis, the increase in incentives rose two and a half times that of existing rentals,” says Jonathan Miller in the report. Miller is the CEO of Miller Samuel Inc. and the author of the Elliman report.
Further, Miller adds that new supply continued to enter the housing stock in December, but was skewed to the high end or luxury submarket.
Landlords use incentives to attract new tenants and keep units occupied. The most common incentive is a period of free rent, currently averaging around 1.3 months in NYC — but some landlords are going high tech by offering Netflix and Hulu subscriptions or Amazon gift cards.
And while use of landlord incentives skyrocketed in Brooklyn, at the same time, the period of free rent decreased to 1.2 months from 1.7 months.
By keeping units occupied, incentives are a tool to keep the vacancy rate in check. Unsurprisingly, Manhattan’s vacancy rate decreased to 1.9 percent from 2.69 percent in December, given the increased use of incentives during the month.
A surge in new leases also helped lower the borough’s vacancy rate in December. The number of new leases grew by almost 50 percent from the same time last year. Renters had fewer apartments to choose from, as listing inventory was down 15.3 percent from last year in December.
Yet despite the record setting use of incentives, the number of new leases fell 10 percent from last year in Brooklyn, and 29 percent in Queens.
Apartment prices continued to cool in December, with the median price falling 2.7 percent year-over-year to $3,295 in Manhattan and 3.5 percent to $2,750 in Queens. Brooklyn remained unchanged at $2,700.
Manhattan’s median net effective rent, or the median rent less the rental equivalent of free rent, dropped 2.5 percent annually to $3,208 — the fourth largest decline recorded in over six years.
Prices continued to “erode” in both smaller units and high-end units in Brooklyn, with the median studio price falling 15 percent from last year to $2,331 in December. At the same time, the median price of a luxury or high-end unit declined by nearly 6 percent annually to $5,000.
“While this is somewhat contrarian to the longer term narrative on the market that I have been describing as soft at the top, smaller apartments have seen much more price growth than larger apartments so I suspect it is simply an affordability issue,” Miller tells BuzzBuzzNews.
The erosion of prices in smaller sized units and high-end units may not be a trend just yet.
“We continue to observe a heavy volume of first-time homebuyers in the outlying suburbs coming from the New York rental market,” says Miller.
Click here to read the entire report.