Rentals and Chill: NYC Rents Cool Down As Inventory Rises
Is it possible the rental boom has peaked? Supply and demand rules the market.
[otw_shortcode_dropcap label=”R” font=”Bowlby One SC” color_class=”otw-black-text” background_color_class=”otw-no-background” size=”large” border_color_class=”otw-no-border-color”][/otw_shortcode_dropcap]enting an apartment in New York City often feels a bit like being on the Titanic—the water keeps rising until you either jump ship or go under. But according to AM New York, renters may have an air bubble to buy a little time.
Taking into account that the colder months usually cause a cooling in the relate estate market, things are easing up for renters even more than usual this fall. The reason? There seems to be a bit of a glut on the market. The New York skyline has become increasingly crowded, with new buildings seemingly sprouting up overnight and the supply, for once, appears to be outpacing the demand.
“Price growth is a little bit slower but also units aren’t getting snapped up quite as quickly, so there’s more of them available” said economist Krishna Rao. “You have a little more breathing room than you would have a year ago.”
The numbers don’t lie. Median Brooklyn rents rose six percent from July 2014 to July 2015. This year the increase is just one and a half percent. In Manhattan it’s a similar story with this year’s rent increasing more than two and a half percent between July 2015 &16. The year before it clocked almost four and a half percent increase.
Even the mighty Williamsburg, where everything from apartments to kale is usually overpriced and overhyped, is experiencing vacancies. Roa examined Fifth & Wythe, a seven-story, 164-unit rental in Williamsburg, currently completing construction and currently has 14 available listings. Similarly, The Berkley, a seven-story, 95-unit rental also in Williamsburg, still under construction, had six available listings.
More vacancies mean more concessions as once lackadaisical landlords find themselves doing something they haven’t done in years—hustle. It’s a mad scramble to get signed leases before the winter chill sets in, when people are less likely to move. AM New York reported that real estate firm Citi Habitats found that 20 percent of new Manhattan rental leases in August came with bonus concessions. Last month’s vacancy rate was the highest it’s been in August since the brokerage began tracking the number in 2002. And as for the usual concessions, such as a free first month’s rent or a waived broker’s fee, the Wall St Journal reported uneasy owners are now offering free gym usage for a limited time, iPads and broker gift cards. What next? A month’s free Uber, a Caribbean vacation?
“A lot of the owners look at what they got a year ago in rent and they just think that it should always go up,” Gary Malin, President of Citi Habitats told the WSJ. “The economy is not producing enough jobs to stomach these prices.”
But let’s not fool ourselves, here. It’s not as if a high school math teacher is suddenly going to be able to afford a Soho penthouse. New York rents are still astronomical. And even if you’re taken in by the lure of concessions, watch out, those brokers are slick. They have more strategies up their sleeves than David Copperfield has aces. They will never actually reduce the rent on the lease because that would cut into their yearly increase. Rather, they may add an addendum showing that there was a one-time deduction. Depending on the market and a renter’s hutzpah, they could push for an actual change on the lease. But then they might just find themselves hunkered down in their childhood bedroom for another year. At least there’d be mom’s cooking to look forward to.
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