Rents rose last year, paced by a 7.2% bounce (to $2,512) in rents for one bedrooms; vacancy rates fell to 1.8%—far below February ’09 peak of 2.5%.
The Manhattan residential rental market rebounded last year, and at a faster clip than many had anticipated, according to a new report.
The year started out in neutral with both rents and vacancy rates holding flat in the first six months, but things picked up in the last half, according to Citi Habitats, the city’s largest residential rental brokerage. Landlords also started to pull back on incentives, such as months of free rent.
Average rents, not including landlord incentives, for all apartment sizes in the fourth quarter of 2010 rose from the same period of 2009. Rents for one-bedrooms and studios led the charge, increasing 7.2% to $2,512 and 6.2% to $1,840, respectively. These smaller-sized apartments represent 75% of the rental inventory in Manhattan.
“No one believed things could change that fast,” said Gary Malin, president of Citi Habitats, noting that Manhattan is predominantly a rental market. “Although unemployment is high, New York continued to produce jobs, and people still came to the city to live.”
In December, vacancy rates reached 1.3%. That was down from the same month a year ago when the vacancy rate was 1.8%—far below the Manhattan vacancy rate peak of 2.5% reached in February 2009. Mr. Malin notes that even at its peak, Manhattan vacancy rates were far below national averages. According to published reports, the national rental market is just starting to recover, with vacancy rates in December slipping below 7%—for the first time since 2008.
“The rental market was better and more stable last year,” said Gus Waite, a rental broker at Bond New York. “The market returned to normalcy.”
The rental market also benefited from the tighter credit markets, which made it harder for people to buy a home.
“The buyer pool shrank,” said Mr. Malin, adding that many potential buyers ended up saving their money and renting.
One of the bigger shifts in the year was a steep decline in landlord incentives. Last month, a mere 22% of all the transactions that Citi Habitats brokered included owner-paid incentives such as a month or two of free rent. In December 2009, 60% of the brokerage’s deals included concessions.
“As the year went on, landlord incentives began to disappear,” Mr. Waite said. “Tenants found it more difficult to find an apartment where landlords provide incentives.”