Manhattan Residential Rental Market 1Q16 Report by Citi Habitats
Manhattan residential rental market – First Quarter 2016
The report that follows tracks the Manhattan residential rental market throughout the first quarter of 2016. When compared to the last quarter of 2015, market conditions have remained generally stable. Average rents for all apartment sizes were relatively unchanged, while the borough’s vacancy rate declined, reflecting an uptick in demand for rental housing.
Landlord concessions were on the rise during Q1
The lower quarterly vacancy rate is largely the result of an increase in landlord concessions. Throughout the first quarter, 21% of transactions brokered by Citi Habitats included some form of move-in incentive, compared to 12% during both the previous quarter and a year ago (in Q1 2015). In fact, a larger percentage of leases included an incentive during the first quarter of 2016 than in any quarter in more than 5 years. The last time they were as prevalent was during the third quarter of 2010, when they were included in 22% of new leases. For reference, the use of concessions hit an all-time quarterly high during the fourth quarter of 2009. During this period a full 55% of leases signed with our firm included an incentive to the new tenant.
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These move-in incentives typically take the form of one month of free rent or payment of the broker’s fee. During the most recent quarter, incentives helped landlords drive traffic to their properties, thus lowering the vacancy rate. At the same time, they created a sense of ‘value’ in the market for apartment seekers, and allowed building owners to keep their face rents high. In fact, monthly pricing increased slightly at some buildings when compared to the last quarter of 2015, especially for studio and one –bedroom units, which make up the majority of housing stock in the borough.
As a result, rents have remained stable
When comparing the first quarter of 2016 with the quarter that preceded it, rents changed minimally. Pricing for studios rose 0.2%, while the average rent for a one-bedroom apartment increased 0.7%. In contrast, rents for two- and three-bedroom homes fell 0.3% and 0.4% respectively.
Year-over-year however, average Manhattan rents climbed across the board. Rents for one-bedroom apartments increased the most, with a 4.5% rise. Meanwhile, rents for studio units rose 2.6%, while pricing was up 2.1% and 2.4% for two- and threebedroom homes respectively.
While the vacancy rate fell
When examining vacancy rates across Manhattan, we found 1.77% of apartments to be available during the first quarter of 2016, down from 1.96% in the fourth quarter of 2015. However, would-be tenants had more inventory to choose from during the most recent quarter when compared to a year ago. During the first quarter of 2015, 1.52% of apartments were vacant.
Month-over-month, conditions have plateaued
Looking at the most recent data, average rents in March 2016 remained largely unchanged from February. Meanwhile the Manhattan vacancy rate increased slightly to 1.79% from February’s rate of 1.74%. In addition, we found that 20% of leases signed with our company included an incentive during March. While down from 25% a month earlier, this percentage is still considerably higher when making a year-over-year comparison. As was the case in Q1 and Q4 2015, 12% of Citi Habitats’ rental transactions included a concession in March 2015.
The continued prevalence of concessions is indicative of a Manhattan residential rental market that faces more competition than ever before. With the borough’s average rents hovering near all-time highs, increasingly our clients choose to pursue ‘better value’ housing opportunities. Often this means looking to Brooklyn and Queens, which are currently experiencing a boom in the construction of luxury rental properties. As a general rule, lowering rents is a landlord’s last resort – so incentives remain in play to help some Manhattan buildings compete with their new outer-borough rivals.
Regardless of your target neighborhood, renting an apartment in New York City can be a daunting process. Being well-informed on current market conditions is the first step in making a smart decision regarding your next move. With that goal in mind, we hope this report proves to be a valuable resource.
Gary Malin, President, Citi Habitats
When examining our report, please keep the following in mind:
1. The statistics in the letter above, and in the report that follows, are based on Citi Habitats’ closed rental transactions, current rental listings in the firm’s database and company research.
2. Average rents cited in this report are, for the most part, gross rents, not net effective rents, and do not include landlord incentives, unless the face rent reported on the lease was the net-effective amount.