Photo: Robert Clark
The use of incentives by Manhattan landlords remained elevated in June.
And while landlord incentives kept the borough’s vacancy rate low, average rents continued to trend downward in June, according to a report released yesterday by New York brokerage Douglas Elliman.
“The overall vacancy rate fell sharply from the same period last year as rising incentives continued to be a productive tool to manage inventory,” wrote Jonathan Miller, CEO of the appraisal firm Miller Samuel and author of the report.
Over the last year, the net share of new leases in Manhattan that contained landlord incentives rose from 23.9 percent to 32.6 percent in June — marking the 37th consecutive month of year-over-year rise in incentive market share.
Landlord incentives are typically a period of free rent used by landlords to keep units occupied, which in turn keeps the vacancy rate down. Increasing numbers of landlords are even luring new tenants with more high-tech incentives like Netflix subscriptions.
June’s incentive was an average of 1.3 months of free rent, unchanged from May.
After edging up to 1.85 percent in May, Manhattan’s vacancy rate fell to 1.6 percent last month. June’s reading was substantially below the 2.21 percent recorded the same time last year.
With incentives being effective, Miller doesn’t see their use slowing in the foreseeable future.
“It’s has kept vacancy low despite rent declines and with new supply continuing to enter the market, I don’t see this trend changing soon,” Miller tells Livabl.
Manhattan median rents decreased by 2.9 percent annually to $3,400 in June. Net effective median rent — face rent minus incentives — fell year-over-year for the sixth time in the last seven months.
The most substantial price decreases were recorded in the new construction submarket, where the median rent of a new condo fell by 8.4 percent annually to $4,394 in June.
There were 21.3 fewer Manhattan apartments to choose from in June compared to last year and units were on the market an average of 27 days — 14 days fewer than the same time last year.
Meantime, the share of Brooklyn leases that contained incentives more than doubled from last year in June. Over the last year, the use of landlord incentives rose to 40.4 percent from 17.1 percent.
Brooklyn’s median rent remained unchanged from last year at $2,850 in June. While the number of new leases decreased by 17.7 percent year-over-year in June, Miller says it was “reflective of landlords being more effective at the time of lease renewal.”
Similarly, Miller writes that the “broad use” of incentives was a sign that landlords were being more effective at tenant renewals.
Some 81 percent of all new construction leases contained incentives.
In Queens, June marked the 16th consecutive month of yearly gains in incentive market share. Nearly 46 percent of all new leases contained incentives in June, up from 38.3 percent the same time last year.
Nearly a third of all rental activity in June came from new construction projects, with 84 percent of new condo leases containing landlord incentives.
New construction’s impact on the larger Queens market still appears to be minimal.
“On the one hand, new construction represents a small share of overall housing units but it has enabled the absorption of demand spilling over from Brooklyn,” Miller says.
Click here to read the entire report.