On behalf of The Real Estate Group, I am pleased to present the May 2009 edition of our Manhattan Rental Market Report, the only research on the city’s rental rates published on a monthly basis.
May marks the official start to the summer seasonality in Manhattan’s rental market. Keeping in line with this trend, we have witnessed that rental demand has been steadily increasing week-over-week since the beginning of April. Our firm has seen an increase of approximately 33% in rental deals this April compared to April of 2008 — when the market was at its apparent peak. So, it’s clear to us that consumer demand is back.
While we, as well as many others in the industry, are excited about this development, our experience has taught us that demand tends to ebb and flow with a greater deviation than the market itself. While we have seen some owners realize the increase in demand and begin to test the market, we are concerned that, as what happened last summer, owners that are too aggressive to raise prices or slash incentives will find themselves holding excess inventory going into the fall.
In fact, the news from our consumer base is not as optimistic as the demand numbers indicate. Many potential renters have told us that the issues with securing employment in Manhattan have not subsided and while many new grads are looking for housing in the city, a great deal of them are doing so without employment or with start dates that have been pushed back.
Also, taking a broader perspective on the data, it appears that Manhattan did not just lose two years of growth, but actually fell significantly below those numbers overall. Doorman units are down 6.92% and non-doorman units are down 3.62% since May of 2007. Some of the greatest decreases were in Midtown East doorman studio units (down 20.69%), Murray Hill non-doorman one-bedroom units (down 20.71%), East Village doorman one-bedroom units (down 18.44%), Midtown West non-doorman two-bedroom units (down 20.42%), Gramercy Park non-doorman two-bedroom units (down 20.25%) and Midtown East doorman two-bedroom units (down 21.33%). It is also important to note that these numbers do not take into consideration concessions or OPs, which would most likely make the net effective numbers even greater. [See Appendix A]
The bottom line this month is that while the market appears to be picking up, it doesn’t yet appear that the market has recovered.
Daniel Baum, C.O.O.
The Real Estate Group
On behalf of The Real Estate Group, I am pleased to present the April 2009 edition of our Manhattan Rental Market Report, the only research on the city’s rental rates published on a monthly basis.
I am pleased to report to you that for the first time in some months, prices are beginning to hold in the rental market. Both rents and vacancies across the city have remained virtually flat this month – a good sign for the health of the market. The greatest price change was only -1.41% in non-doorman studio units – which is a good indicator to us that a majority of the market is starting to find equilibrium, at least in a month-to-month comparison. And as we pointed out last month, it appears that doorman landlords and property owners have been more assertive in fighting vacancies through a combination of incentives to tenants and concessions to brokers. Doorman vacancies were actually down 3.15% this month, while non-doorman units continued to increase 4.33%.
Looking more broadly, compared to April of last year, citywide rents remain down significantly across the board. We are cautiously optimistic though as April marks the start of the city’s peak rental season. As many are aware, this seasonality brings with it the new hires and intern class which has traditionally helped to both absorb supply and allow owners to increase their asking rents. Our relocation contacts and HR managers, however, have told us that these new hire classes will be down anywhere from 20 to 30% from years past. So it’s our expectation that while we will see an increase in rental demand during the summer months, these increases will not have the same pronounced effect that they previously have.
Daniel Baum, C.O.O.
The Real Estate Group
On behalf of The Real Estate Group, I am pleased to present the March 2009 edition of our Manhattan Rental Market Report, the only research on the city’s rental rates published on a monthly basis.
As the first quarter closes, we find that prices in Manhattan continue to lag in year-over-year comparisons. The largest difference this month is in doorman studio units, which decreased 10.43%. Doorman two-bedrooms were the relative stand-outs this month, only having fallen 2.59% since this time last year. It should be noted that these numbers do not take into consideration concessions, which would likely have shown an even more prominent downward trend, especially in doorman units.
In month-to-month comparisons, non-doorman units are flat overall, while doorman units fell 2.01%. Hidden within the data was actually an increase in non-doorman two-bedroom units by 2.28%.
As for vacancies, doorman units continue to fall in price while offering aggressive concessions, and in turn, inventory levels have stopped rising and flattened out this month. This is a positive sign for doorman property owners and landlords who have been proactively attempting to fill their units via such actions. Non-doorman units, however, did not see the same price cuts and so their inventory levels actually climbed by 10% this month - illustrating just how price sensitive the current market is.
As Manhattan begins to show direct and proper responses to market actions, I am becoming ever hopeful that we are moving towards a healthier rental market, or at least, that seasonality trends will again be upon us soon. Landlords, property owners and consumers still have a long road to find the middle ground, but I am confident in the market’s ability to do so.
Daniel Baum, C.O.O.
The Real Estate Group
On behalf of The Real Estate Group, I am pleased to present the February 2009 edition of our Manhattan Rental Market Report, the only research on the city’s rental rates published on a monthly basis.
The Manhattan rental market continues to trail 2008 levels this month as rents are down across the board in year–over–year comparisons. The largest changes were in doorman studio units, which are down by 8.33%.
Month–to–month comparisons have been consistently down in recent months, however, category performance versus January is mixed. While doorman one and two–bedrooms were down 1.68% and 1.38%, non–doorman studio units showed an increase of 2.47% — the rest, were relatively flat.
After the decrease we observed last month, inventory levels are back on the rise in February. Vacancies are up 15% overall — 11% in non–doorman and 17% in doorman units — further supporting the weakened state of the market.
The driving force behind demand continues to be Manhattan’s conversion to a no fee market as renters continue to consistently respond to no fee properties and no fee advertising. These types of concessions appear to be a successful method to decrease inventory levels, as we observed last month.
Looking ahead, it seems that the road to recovery in Manhattan will not be the quick one that many had hoped for. While demand in Manhattan seems to be increasing, the market does not yet seem ready to be tested for price increases.
Sincerely,
Daniel Baum, C.O.O.
The Real Estate Group
On behalf of The Real Estate Group, I am pleased to present the January 2009 edition of our Manhattan Rental Market Report, the only research on the city’s rental rates published on a monthly basis.
Despite the negative end to 2008, as the new year begins, the collective mood here at TREGNY is both excited and hopeful for the Manhattan rental market. So, I am happy to report that there is at least some good news to be had this month.
In direct response to the concessions and price drops that landlords have been offering, vacancies have dropped in doorman buildings almost 7% and 1.27% overall since December. This is the first reduction in vacancies in doorman units since September. These numbers illustrate that offering incentives and being diligent about reducing rents when appropriate is a successful strategy for absorbing inventory. At the same time, it comes as little surprise that non–doorman vacancies are continuing to rise, up another 8.45% since December, as landlords with these units seem to be less willing to be as aggressive with their concession offerings.
However while there is good news this month, there continues to be reminders of the downward pressure Manhattan is experiencing. Rents are still down across the board in both month–to–month and year–over–year comparisons. These numbers reinforce that landlords and property owners should remain vigilant in filling their vacancies via concessions and price drops, especially those with large numbers of vacant units.
Finally, I am optimistic that the negative news of this earnings season may actually be a blessing in disguise for the rental market. With the outpouring of luxury rentals on the market, I am hopeful that the lower bonuses realized this year will increase the demand for higher–end rental units and allow the rental market to gain some ground.
Sincerely,
Daniel Baum, C.O.O.
The Real Estate Group
We are proud to present The Real Estate Group’s second annual Year End Report, the summation of our second year’s worth of data collected from our monthly Manhattan Rental Market Reports. We hope you find these pages useful in determining the rental trends of Manhattan’s major neighborhoods, as well as the overall climate of the Manhattan rental market during the course of 2008.
We can all agree that 2008 will be looked upon as the year that Manhattan finally capitulated to the trends that were already plaguing the rest of the nation. While we started the year with high hopes that the market would buck trends and continue its path of relative stability, the Wall Street collapse eventually brought reality to bear.
The uncertainty and job loss from the financial markets finally hit Manhattan’s rental market toward the end of the summer, bringing rising vacancies and tumbling rents. The Manhattan market, that was at one time very much favorable to owners and landlords, turned into an unquestionable renters’ market in a fairly short period.
To the contrary, from a tenant’s standpoint, 2008 may be considered particularly favorable, especially when compared with recent years past. Prices fell in nearly all categories and unit sizes, with the exception of doorman two–bedrooms, and year–over–year comparisons showed decreases in all but non–doorman studios. Moreover, concessions, which have not recently been seen in Manhattan, have become the norm.
Looking ahead, the numbers suggest that renters are taking advantage of the opportunities provided by the downturn, but that concessions alone will not be enough to return Manhattan’s rental market to stability. Realistically speaking, 2009 looks to be a continuation of the downward pressure we have already felt in the fourth quarter of 2008. I strongly recommend that owners and landlords continue to be aggressive in protecting their portfolios from rising vacancies. Offering concessions, paying broker fees and, when necessary, dropping rents will help keep units occupied.
As an entrepreneur, I look at 2009 with hope that the changes the new administration has promised to bring will move us through the downturn quickly, but only time will tell.
Sincerely,
Daniel Baum, C.O.O.
The Real Estate Group
On behalf of The Real Estate Group, I am pleased to present the December 2008 edition of our Manhattan Rental Market Report, the only research on the city’s rental rates published on a monthly basis.
As expected, this month’s numbers keep in line with seasonal trends, showing declines in asking rents and increases in vacancies; however, the rent decreases in year-over-year comparisons illustrate that that this downward pressure reflects more than simply a sluggish fourth quarter. The Real Estate Group also continues to receive inquiries from landlords seeking guidance on appropriate pricing for their properties in the increasingly difficult housing market. The combination of these factors reinforces our sentiment that the market has turned in favor of the consumer.
That said, the concessions that we discussed in last month’s report, appear to have helped to fill some of the vacancies in the market as consumers use these incentives to upgrade, downgrade or generally use them to their advantage. Still, it seems as though concessions alone will not be enough to stabilize the rental market.
Going forward, the economic climate of Manhattan will continue to play a key role. The unemployment rate will be the single most influential factor in whether the year ahead will mark the return of the rental market to stability, or whether the downturn will be more prolonged and pronounced as some are predicting.
From all of us at The Real Estate Group, we wish you and your families a happy and healthy new year.
Sincerely,
Daniel Baum, C.O.O.
The Real Estate Group
On behalf of The Real Estate Group, I am pleased to present the November 2008 edition of our Manhattan Rental Market Report, the only research on the city’s rental rates published on a monthly basis.
Landlords throughout Manhattan are becoming increasingly anxious as they watch units sit vacant, even as prices fall. Rents are down across the board this month, in both month–to–month and year–over–year comparisons. Still, our data sets show that vacancies continue to rise and are up by 7.5% this month, and 17% since September of this year.
Readers should note that while the data does not paint a rosy picture for the Manhattan rental market, the situation may actually be worse than the numbers let on. The growing vacancies that we see may not be fully reflective of the breadth of units available, as many owners are not releasing their full vacancy list. Additionally, our asking rent data does not consider concessions, such as free rent and owner–paid broker fees, that are being used more aggressively to incentivize consumers.
Moreover, the increase in volume of high–end units on the market today, may be keeping average rents at a higher point than they would be otherwise. This is especially true in neighborhoods like the Financial District and Chelsea. Again, illustrating how the numbers may not be telling the entire story.
The good news is conditions are becoming much more favorable for the consumer. There are more options at lower prices than I’ve seen in a long time. Studios can be found for under $1,500/month again and property owners continue to offer incentives, in addition to price reductions. Now, and over the next few weeks, will be a great opportunity to find an apartment at a significantly lower price than may be available after the New Year, when seasonal forces could help to stabilize the market once again.
Sincerely,
Daniel Baum, C.O.O.
The Real Estate Group
On behalf of The Real Estate Group, I am pleased to present the October 2008 edition of our Manhattan Rental Market Report, the only research on the city’s rental rates published on a monthly basis.
As we are entering into the historically sluggish fourth quarter, we normally expect to see a seasonal slowdown. In step with these trends, rents are down across the board this month and inventories, which had previously been in a two–month decline, are back up sharply.
Moreover, in year–over–year analysis, rents are down in all rental categories by as much as 7.23% in doorman studios, with the exception of doorman two–bedrooms. To us, this seems to be a clear indicator of downward forces beyond simple seasonality trends.
While we noted last month that it appeared that landlords were making progress to lower vacancies by lowering rents and offering concessions, this effort does not seem to be enough to right a market that is being heavily influenced by economic factors, above all being unemployment.
Consequently, incentives, which had previously been used strategically to lure renters, have now become the norm and have become even more aggressive. Rentals that had previously been offering to pay brokerage commissions or a free month’s rent in many instances are offering both, and we expect these concessions to become even more creative as we move deeper into the winter.
Looking ahead, it appears that the rental market will have a variety of forces to contend with, which could make the fourth quarter a difficult time as renters and landlords fumble for balance.
Sincerely,
Daniel Baum, C.O.O.
The Real Estate Group
On behalf of The Real Estate Group, I am pleased to present the September 2008 edition of our Manhattan Rental Market Report, the only research on the city’s rental rates published on a monthly basis.
Once again the Manhattan market never ceases to amaze me. At a time when the financial markets seem to be in turmoil, unemployment is on the rise, and the housing market is in jeopardy of an even more serious slow down, the rental market appears to be bucking seasonality trends and possibly starting to gain footing.
This year, the summer upswing that we would normally expect to see was absent, making September’s gains appear as a rebound. And while August’s slump questioned a link between the sales and rental markets, it seems the rental market is finally seeing a benefit from sluggish sales.
As Congress debates a credit market fix, Manhattan property owners have created their own “rental market fix.” Making a concerted effort to lower vacancies and prices, inventories have fallen for the second consecutive month. This much needed correction is giving Manhattan a fresh breath of stability, which is good news for both renters and property owners alike.
Even with this good news however, I would caution property owners to remain conservative with asking rents. As we move into the fourth quarter, which historically has been the slowest time for the rental market, property owners should proceed with caution to avoid sending inventory levels rising again.
Sincerely,
Daniel Baum, C.O.O.
The Real Estate Group
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