The Federal Reserve on Wednesday supported recent data showing some worrying trends in parts of Manhattan’s real estate market.
The Beige Book compiled anecdotes from contacts of the 12 regional banks, including the Federal Reserve Bank of New York. It is not a hard data release.
“New York City’s rental market has been mostly steady, except at the high end, where the inventory has risen and rents have drifted down,” the Beige Book said.
There are too many luxury apartments in the city, with more developments still rising from the ground. A report from Douglas Elliman Real Estate released last month showed that new development inventory surged in the third quarter after four straight periods of declines. Inventory had been falling because developers were moving their properties from active to shadow status to avoid extended marketing periods, the company said.
But this glut has given buyers more options, and some more bargaining power to push back against prices they think are unfair. If prices continue to fall, the balance of power in the market could shift so that it becomes a buyers’ market.
“Prices have declined at the high end of the market but remained steady for more moderately priced units; bidding wars have become noticeably less prevalent,” the Beige Book said.
“Landlord concessions have grown increasingly prevalent, especially in Manhattan and Brooklyn,” the Beige Book also said. Concessions include things like a month of free rent and high-end appliances, and are part of landlords’ efforts to make renters more willing to pay their asking prices.
The Fed noted that rental vacancy rates in northern New Jersey and upstate New York remained near multi-year lows, while rents rose by about 4% year-on-year.
On the commercial real-estate side, the Fed noted an increase in office availability. Cushman & Wakefield’s third-quarter report on Manhattan real estate released in late-October showed that vacancies rose in every submarket that the firm tracks. Notably, there was a record amount of empty retail space along the high-end strip of Fifth Avenue, as fewer companies chose to pay a premium for that location.
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