Volume of new lease signings triples in third quarter, despite a major hardening in landlords’ negotiating stances; time it takes to rent out units halved to 38 days.
October 07, 2010 5:59 AM By Amanda Fung in Crains NY Business
The Manhattan rental apartment market continued to strengthen in the third quarter of the year, according to two reports released Thursday.
The number of new leases signed during the quarter rocketed to 8,593, more than three times the total in last year’s third quarter, according to a report by brokerage Prudential Douglas Elliman Real Estate and appraisal firm Miller Samuel Inc. Meanwhile, Citi Habitats, the city’s largest residential rental brokerage, said in its own report that it completed more than 4,250 transactions during the quarter, up 15% from year earlier levels.
There was a surge because more people were moving, said Jonathan Miller, chief executive of Miller Samuel. Concessions were not like what they used to be in 2009, so when renewals came up, people opted to look for a new apartment.
The surge in leasing came despite a considerable hardening of landlords’ negotiating stance as measured by the listing discount, the percentage difference between original rental listing price and the contract rental price. That gap shrank to 1.7% in the third quarter—its lowest level since the third quarter of 2006, Mr. Miller said. It is also a huge drop from the 7% gap recorded a year earlier.
Apartments also rented up quickly during the quarter. Units were on the market for just 38 days, down from 77 a year earlier and even shorter than the 10-year average of 50 days.
“In the last 12 months, we have seen it go from a tenant market to a landlord market,” said Gary Malin, president of Citi Habitats. “The rental market was extraordinarily strong this last three months; we saw bidding wars and numerous applicants. Apartments did not sit on market.”
Despite such reports, the picture on rents overall was a bit cloudy in the quarter. Citi Habitats reported an increase in average rents across all apartment sizes for the third quarter, compared to a year ago. Studio and one-bedroom apartments recorded the biggest increases, up 3.9% to $1,828 and up 3.2% to $2,501, respectively. But according to the Prudential Douglas Elliman report, the average rental price per square foot slipped 1.3% to $47.22.
Corporations that are starting to hire and find apartments for their new employees added to the demand in the quarter. Prudential Douglas Elliman’s corporate relocation business rose 25% in the third quarter from a year ago, said Stephen Kotler, executive vice president at Prudential Douglas Elliman. “That was surprising.”
But experts note that concerns over potential Wall Street hiring freezes and layoffs, as well as the mid-term elections, may impact the rental market in the final quarter.
“The Manhattan rental market rebounded a lot quicker than anyone anticipated,” Mr. Malin said. “But there are a lot of balls in the air that make people nervous.”