Manhattan Apartment Rents Edge Up In 1Q

At an average of price of $3,812, the borough's apartment rents are up 0.6% from the fourth quarter but still down 8% from the year-earlier levels.

 

By Amanda Fung 

Crain’s New York Business

April 8, 2010

 

In another sign of stability returning to the huge Manhattan apartment market, the average rent edged up slightly during the beginning of the year, compared with the end of 2009.

 

Average rent increased 0.6% to $3,812 during the first quarter, compared with the previous quarter, according to Prudential Douglas Elliman and appraisal firm Miller Samuel Inc. Nonetheless, that figure was down 8% from the first quarter of last year. A separate report by Citi Habitats, the city's largest rental brokerage, also indicated that rents “remained relatively consistent over the last several months.”

 

“The decline in price from a year ago was expected because there was so much inventory and landlords needed to be aggressive in order to attract tenants,” said Stephen Kotler, executive vice president at Prudential Douglas Elliman. “But there is a stabilization of the rental market.”

 

In another positive sign, the average vacancy rate for the first quarter slipped to 1.45%, a 0.9 percentage point drop from the same period a year ago, according to Citi Habitats. In March, the vacancy rate slipped still more, hitting 1.38%—the lowest level since August 2008.

 

“The decrease in vacancy rate since November shows that there is a lot of activity,” said Gary Malin, Citi Habitats’ president. “Apartments are being absorbed.”

 

There was a 16% increase in the number of rentals during the first quarter, compared to the same period last year, according to both reports. Approximately 2,650 rental transactions took place during the quarter. Much of the increase in lease signings was driven by concessions that landlords were offering tenants. Those concessions, which include months of free rent, are expected to diminish or disappear over time as the market warms up.

 

“Going into the spring and summer months, the heaviest demand period for rentals of the year, we will see concessions ease,” said Jonathan Miller, chief executive of Miller Samuel.

 

That means landlords may start to have the upper hand. “In the beginning part of 2009 landlords had to do everything they could to attract tenants, but now they sense that they don't have to anymore,” Mr. Malin said.

 

Despite the positive news, experts are still concerned over whether the rental market will continue to strengthen. The still-high unemployment rate has a depressing effect on the rental market.

 

“Unemployment is still too high to project a stronger market,” Mr. Miller said.