Certain markets in New York are beginning to see a decrease in rent prices as landlords face mounting pressure to fill vacancies.
Like many other areas of the country, New York experienced a boom in higher-end listings over the last few years. Now, however, higher-end real estate is facing an oversupply as the market at the top softens and the affordable homes and apartments are snatched up faster than the market can keep up with.
The share of concessions, or incentives offered by landlords to attract renters, increased significantly over the past couple years, data from real estate appraisal and consultants company Miller Samuel showed. These concessions usually range anywhere from one to 1.5 months of free rent, but it is not uncommon to see up to three months.
Over the past year, concessions rose from 15.1% to 26.5% in September 2017 in Manhattan. In Brooklyn, the story is much the same with concessions up from 8.9% to 20.3% during that same time. Queens showed the highest rate of concessions with a full 42.8% of apartments offering concessions to renters, up from 11.7% last year.
The high rate of concessions in Brooklyn is due primarily to the influx of new development in the area, which typically offer concessions at a higher rate than existing properties, Miller Samuel President and CEO Jonathan Miller told HousingWire.
However, even offering more concessions hasn’t been enough to attract and keep tenants, Miller explained. The report shows vacancy rates continue to steadily rise, hitting 2.63% in Manhattan, up from the previous year’s 2.38%.
“After the lease expires, the tenants have to move out because concessions are only good for the first year,” Miller said.
Now, not even higher concessions are enough to attract renters. Landlords are being forced to lower their monthly rents.
In Manhattan, the average rental price decreased 0.6% to $4,094, and net effective rent, the price when calculating for concessions, fell 0.4% to $3,334. Monthly, the net effective rent dipped for the tenth month in the past 12 months.
Brooklyn median rent saw its largest drop in the spring of 2015, but decreased 2.3% annually to $3,123 in September. Net effective rent decreased for the fifth consecutive month, falling 5.6% to $2,757.
Rentals in Queens remained flat, increasing just 0.2% to $2,793. However, when calculating for its heavy usage of concessions, the median net effective rent slipped 1.3% to $2,717.
Miller explained the rental market in New York has already begun to see a cooling in prices, and will continue to drift lower as landlords seek to reverse the growing vacancies.
A recent report from RENTCafé, a nationwide internet listing service that enables renters to find apartments and houses for rent throughout the U.S., shows this trend expands even past the New York City area, as the median rent across the nation held steady for the fourth consecutive month.
And as rents cool off, some studies are even beginning to reconsider the financial benefits to renting over owning a home. A new study from Trulia found that while buying almost always outweighs renting, there are exceptions.