Investor’s Business Daily, Inc. Reprinted in Yahoo Finance. Thursday August 12, 6:05 pm ET
Demand is that strong for the property, which targets the army of young people who flood into the city each year to get degrees and start careers.
The rental market is rebounding, especially in New York and other markets where job trends are improving: Washington, D.C.; Chicago; San Francisco; San Jose, Calif.; and Seattle.
But New York could top them all in rent growth. Here, tenants show an appetite for new and luxury digs. Wall Street is hiring again and rents are rising, concessions are going away and vacancy rates have gone down each month since November, said Gary Malin, president of Citi Habitat, a residential brokerage. The market has done a complete 180-degree turn from a year ago.
Manhattan’s rental-listing inventory fell 32% in the second quarter vs. a year earlier, to 4,972, according to Prudential Douglas Elliman.
Apartment renting is starting to rebound around the U.S. too, spurred by tighter lending standards to buy homes, higher down payments and a modestly improving job market.
Some of the improvement is occurring because we don’t have big job losses anymore, said Mark Obrinsky, chief economist at the National Multi Housing Council.
Spartan Takes A Holiday
It used to be that young new arrivals to the Big Apple could expect few creature comforts. But Atlantic Development’s Port 10 packs them in. Its Web site shows 20-somethings at play, blurbs such as bye mom and dad, and perks from in-unit washers and dryers to Italian porcelain tile baths and a landscaped roof deck with movie screen. Studios start at $2,500 , one-bedrooms $3,500.
The same developer is behind 2 Cooper Square, where one-bedrooms start at $4,500 a month. The highest-priced unit, $22,000 a month, was snapped up by someone in the financial community, said Richard Cantor, principal of on-site leasing firm Cantor Pecorella.
Besides high-end interior finishes, common areas feature a rooftop pool, club lounge and private massage and treatments room.
The appeal is living like royalty, just not as king of one’s own castle.
More people are choosing to rent or are forced to as the American dream of owning a home remains dimmed by the credit crisis and housing market collapse. Homeownership dropped from 69.2% at its peak in 2004 to 66.9% in the second quarter, the lowest since 1999.
After two years of drops, rents nationwide rose 3.2% in the first half of 2010 vs. a year prior, says apartment market research firm Axiometrics.
But July’s job-growth slowdown could foreshadow flattened growth the rest of the year, warns Axiometrics President Ronald Johnsey. His firm’s full-year forecast for U.S. rent growth is 3.3% on average. That follows a nearly 6% dip in 2009.
Among markets with improving job trends, Johnsey says San Jose rents jumped 7.5% this year through June. San Francisco’s were up 4.5%, Seattle’s 5.1%. In Tacoma, outside Seattle, rents rose almost 10%.
South Florida, hit by a home-value collapse, is seeing moderate job growth and improving rental trends.
New York metro area rents rose 5.5% in the first half, Johnsey says, and suburban Long Island 6.3%. Metro New York gained a seasonally adjusted 56,600 jobs in that time, government data show. Axiometrics sees rent growth of 4.6% this year, 7.5% next, 6.6% in ’12 and 5.6% in ’13.
That would rank New York the best-performing rental market from 2011 through 2013, Johnsey said. San Jose is No. 1 this year.
Like San Francisco, New York has had a strong rental market due in part to expensive housing stock. In Manhattan, rentals ? many rent-stabilized ? make up about 75% of available housing, Malin says.
The housing boom fueled a surge in new condo construction in New York City, causing a glut in unsold units when the market tanked. Many of those units have entered the rental pool, something common in other overbuilt condo markets like Miami.
Vacancy Rates Remain High
As the rental market improves, vacancy rates have been dropping from their peaks in late 2009. But they are still above pre-recession levels.
Vacancy rates nationwide fell from 13% in the third quarter of 2009 to 12.2% in the second quarter of this year, census data show.
Not much new rental supply is coming on to offset drop-offs due to natural obsolescence, observers say.
There was a lot of building at the peak, said analyst Alexander Goldfarb of Sandler O’Neill, who covers apartment REITs such as Essex Property Trust (NYSE:ESS – News), Equity Residential (NYSE:EQR – News), Colonial Properties Trust (NYSE:CLP – News) and AvalonBay Communities (NYSE:AVB – News). He says supply is down dramatically, as development basically came to a halt in the credit crisis.
But that’s slowly changing, as recent activity in New York shows.
Some of the big apartment developers are in the early stages of ramping up again, Goldfarb says. AvalonBay, for one, started breaking ground on a couple of new projects late last year.