Photo: Robert Clark
There may have been fewer New York City rental apartments available in February, but many landlords were still enticing new lessees with incentives.
The use of incentives was at or near record levels in February throughout Manhattan, Brooklyn and Queens. That’s according to a report released today by New York brokerage Douglas Elliman.
In Manhattan, the average rental price fell 2.4 percent from last year to $4,019 in February. Listing inventory was down 17.1 percent from last year in February, but the number of new leases was up 6.8 percent compared to February 2017. The number of new construction leases rose three times faster than those within existing developments. The median price of a Manhattan new construction condo slipped 4.7 percent annually to $4,757 in February.
The net share of new leases that contained incentives was 47.6 percent in February — nearly double what was recorded the same time last year.
Landlords are using incentives as a way to offset high rental prices.
“Landlords are being influenced by higher asking prices at the high end of the market and are trying to keep face rents high,” Jonathan Miller, CEO of the appraisal firm Miller Samuel, and the author of the report, tells BuzzBuzzNews.
Incentives are typically a period of free rent used by landlords to keep units occupied, which in turn keeps the vacancy rate down (as seen this month in Manhattan). Some landlords have begun luring new tenants with more high-tech incentives like Netflix subscriptions and Amazon gift cards. The average incentive is 1.4 months free rent in Manhattan.
Manhattan net effective rent declined 2.8 percent annually to $3,168 — the third consecutive monthly year-over-year decline. (“Net effective rent” refers to the total amount a tenant will pay after adjusting the asking rent for incentives.)
Manhattan’s vacancy rate dropped to 2.29 percent in February from 2.44 percent the previous month, a sign that the use of incentives is working to fill empty units.
Manhattan apartments were on the market an average of 34 days in February, down from the 57 days recorded last year.
Over the last year, the average rental price of a Brooklyn apartment rose 1 percent to $3,109 in February. At the same time, the number of available rentals was down 21.3 percent from last year while the number of new leases rose 15.1 percent annually.
New construction leases surged by more than 50 percent year-over-year but were outnumbered by existing rentals five-to-one in February.
New construction is having a big impact on the overall Brooklyn housing market.
“New construction is playing a big role. We’re seeing a lot of new units entering the market but skewed to the higher end and, as a result, we are overbuilt at the top and under-built at the entry level,” Miller says.
The share of new leases that contained landlord incentives skyrocketed from 15.7 percent last year to 47.5 percent in February — the third consecutive landlord incentive record and tied with January 2018.
At the same time, Brooklyn’s net effective median rent fell 3.1 percent year-over-year to $2,632 — the ninth annual decline recorded in the last 10 months.
Brooklyn apartments were on the market on average of 31 days in February, down substantially from the 53 days recorded last year.
Meantime, the market share of leases in Queens with landlord incentives rose to the third highest level recorded in February. Some 48.8 percent of leases contained landlord incentives.
The number of new leases surged 35 percent from last year in February as new inventory hit the market. Average rental prices decreased by 0.4 percent year-over-year to $2,898 in February.
Queens apartments were on the market an average of 29 days in February, down from the 39 days recorded at the same time last year.
Citywide, the use of incentives is a practice that is going to stick around for a while longer.
“There appears to be no end to new supply whereas the condo new development volume is tapering,” Miller says.
Click here to read the entire report.