New York City’s rental market is on track to continue cooling through the rest of the year, especially in the oversupplied luxury segment.
In February, year-over-year rents for studios, one, two, and three-bedroom apartments in Manhattan all fell, according to the real estate appraiser Miller Samuel. This hasn’t happened since at least September 2012, according to Jonathan Miller, the CEO of the firm.
The luxury market softened the most as developers focused most of their energies there and created more opulent apartments than were demanded for. The cheaper end of the market remained static, but the slowdown in rental-price growth spread to the lower end.
“What that does in terms of the outlook for 2017 is that there’s going to be a slow grind,” Miller told Business Insider. “We’re going to see rents continue to slip at least in the near term, and the weakest segment of the market will remain skewed to the high end because that’s where all the new product is coming in.”
Manhattan’s median rental price fell 0.9% year-on-year to $US3,350 in February. Median prices also fell in Brooklyn and Queens.
Even with these price drops, rental prices remained high and reached what Miller called an “affordability threshold.” He said sales volume in nearby suburbs including Westchester and Fairfield was at multi-decade highs from first-time buyers, people moving out of the city, and those looking to enlarge their living spaces.
“For the suburban boom to cool significantly you’re going to have to see rents continue to fall,” Miller said.
Landlord concessions like a month of free rent fell in February after hitting successive record highs in the prior four months. The share of new leases that included concessions was 26.4% in February, down from the peak of 30.9% in January.
It looks like these concessions are working, at least to get tenants to renew their leases. The number of new leases was down 28% from a year ago. Miller Samuel’s data only captures brand new lease signings, and so that drop showed that more New Yorkers negotiated a good deal to extend their leases instead of moving, Miller said.