A big supply of apartments are leading to price decreases, landlord concessions
Earlier this summer, a report by the New York Times suggested Brooklyn’s rental market was becoming over-saturated. Now, the latest round of market reports seems to back up that claim. According to Elliman's report for the month of August, high inventory in Brooklyn has caused a declining median price and an increase in landlord concessions.
Across the board, the New York rental market has more inventory than it does demand, according to Douglas Elliman’s numbers whiz Jonathan Miller. But that doesn’t mean we have a glut of inventory: "The number of new leases for both Manhattan and Brooklyn are at their highest levels since 2008," Miller says. A strong economy and more affordable properties are driving the demand from renters. But because inventory is still rising faster, it’s keeping price growth in check. "Demand is not quite able to overpower supply which is keep overall rents flat," Miller says. "In other words, there is a record amount of churn out there."
In Manhattan, the median rental price was unchanged from the same time last year, at $3,399/month. And while the number of rentals that include landlord concessions was up 12.1 percent from 7.4 percent, the size of concession (1.2 months of free rent or equivalent) is basically unchanged from last year. Manhattan’s listing inventory jumped 39.6 percent to 7,478, and the number of new leases signed also rose 1.8 percent up to 6,285.
As for Brooklyn, the report shows that median rent declined year over year for the second month in a row, while pricing on all types of apartments—except one-bedrooms—fell short of last year's levels. Median rental price slipped 1.9 percent to $2,895 and average rental price declined 1.5 percent to $3,219.
Still, people are signing leases, due to the arrival of new development and a resistance to price increases. The number of new leases jumped 35.8 percent from a year ago, up to 1,495, while listing inventory rose an impressive 42.7 percent, to 2,501. Over the year, the use of landlord concessions has doubled—from 5.2 percent to 10.5 percent. The size of concession was 1.4 months of free rent or equivalent, up from 1.2 months. Again, says Miller, it’s a matter of "inventory rising faster than demand—too much product coming on than demand can absorb."
Queens saw price increases—the median rent was $2,895, up 5.3 percent, which puts it on par with Brooklyn’s median rent. Overall, Miller notes, price trend indicators rose as the share of new development rentals expanded, skewing prices higher. Listing inventory jumped 57 percent, to 468, with new development making up 43.4 percent of the market share. All that new development, and a limit on price increases, has also causes an influx of new leases, which are up 20.3 percent from last year to 355.
Miller calls the Queens rental market "a choppy market with four months showing year-over-year rent gains and four months showing year-over-year price declines." Overall, he says, it’s "a flat market in aggregate."
Citi Habitats also released its rental report for August, which found that compared to July, rents decreased for all apartment sizes besides three-bedrooms. Over the month, pricing declined two percent for Manhattan studios ($2,318/month) and was down one percent on average for one-bedroom pads ($3,032/month). Average rents for two-bedroom units fell three percent to $4,034, while rents for three-bedroom homes rose slightly to $5,333, just one percent more on average than in July.
Citi Habitats also tracked a high number of landlord concessions compared to last year. Per its report, 19 percent of rental transactions offered a free month’s rent and/or payment of the broker fee to entice new tenants in August. That percentage is unchanged from July, but it’s significantly higher than August 2015, when only 7 percent of leases offered a move-in incentive. Citi Habitats president Gary Malin says this about the rising incentives: "The simple fact is the rental market was overheated and due for a correction—nothing extreme, but enough to get landlords and would-be tenants back on the same page."
Finally, Citi Habitats tracked the priciest neighborhoods for renters during the month of August. In Manhattan, it was SoHo/TriBeCa, with a median rent of $5,995. Gramercy/Flatiron came in second, with its median rent of $4,500. In Brooklyn, DUMBO was most expensive with a median rent of $4,040, followed by Cobble Hill, where the median rent was $3,700. Washington Heights was Manhattan’s cheapest neighborhood, with a median rent of $2,250, while Crown Heights was the cheapest neighborhood Citi Habitats tracked in Brooklyn, with a median August rent of $2,475.
- The Elliman Report: Manhattan, Brooklyn & Queens Rentals [Douglas Elliman]
- Citi Habitats August 2016 Rental Market Report [Citi Habitats]
- All NYC rental market reports [Curbed]