Photo: Robert Clark
The use of incentives by Manhattan landlords pushed the borough’s vacancy rate to a new low last month, according to a report released today by New York brokerage Douglas Elliman.
“After 39 consecutive months with rising concession market share, prices continue to slide and the vacancy rate is at its lowest level in 4 years. The priority has clearly shifted towards keeping their buildings full versus waiting to get a higher rent,” CEO of the appraisal firm Miller Samuel and author of the report Jonathan Miller tells Livabl.
Landlord incentives are typically a period of free rent used by landlords to keep units occupied, which in turn keeps the vacancy rate down. Manhattan’s vacancy rate was 1.58 percent in August, down from 2.27 percent last year.
The net share of all new leases that contained incentives rose from 24.1 percent to 34.7 percent year-over-year in August. The incentive share for the new construction submarket was 55.7 percent.
The average incentive was 1.3 months free rent, unchanged from the previous month and last year. But a growing number of landlords are even luring new tenants with more modern incentives like Netflix subscriptions or Amazon gift cards.
Despite the drop in the vacancy rate and rise in incentives, Manhattan’s average rent fell 1.2 percent annually to $4,039 in August, with an average price per square foot of $66.98.
The number of new leases signed in August was up almost 20 percent from July and up nearly 4 percent year-over-year.
Manhattan renters had fewer apartments to choose from in August. There were over 25 percent fewer listings in August compared to last year. And the average days on market was 27, down from 41 in August 2017.
“Falling inventory is a number that is easily manipulated so we don’t pay much attention to it for rentals. The focus is primarily on incentives and vacancy rate,” says Miller.
However, inventory is having a negative impact on Manhattan’s luxury submarket, where average prices slipped almost 4 per cent year-over-year. The submarket recorded the largest annual price decreases of all price segments in August.
“The rental market, like the sales market continues to show more weakness at the high end than the entry and mid-tiers. This is because the new supply enter the housing stock, whether as rental buildings or new luxury condos being rented out by investors, is steward towards the high end,” says Miller.
Click here to read the entire report.