Manhattan renters may have to give up some of their gripes and bragging rights over the ever-increasing rents they pay for the privilege of living there.
A new report shows that the average rent in Manhattan drifted down 5% since it hit a new peak in August, with the largest decreases recorded for smaller studio and one-bedroom apartments. The super-luxury market remained hot, however.
Rental analysts said that despite the softening of many rents, the market remained very tight. They said it was likely to continue so in the coming year, with landlords expected to offer few concessions, as long as the local economy continued to recover.
“While rents declined slightly for most apartment categories,” said Gary Malin, the president of brokerage Citi Habitats, “overall the city’s rental market remained in the landlord’s favor.”
In August, the average Manhattan rent set a record of $3,461, after rising sharply through much of 2011 and 2012, and after soaring above the previous peak of $3,392 reached in 2007. But by December, that average fell to $3,284 a month, the lowest since March 2011, according to Citi Habitats. The vacancy rate in Manhattan apartment buildings was little changed in December, at 1.37%.
The rental market was driven higher in recent years by the unwillingness and inability of many renters to qualify for mortgages needed to buy co-ops and condominium after the financial downturn. But the high rents and falling mortgage rates led to a pickup in sales of smaller studio and one-bedrooms apartments. That has eased the demand for rentals.
With many renters still unable to qualify for mortgages because of tight credit conditions, the effect of this shift will likely be limited, keeping the apartment market tight, said Jonathan Miller, an appraiser and president of Miller Samuel Inc., who released a monthly rental report for Douglas Elliman.
“I don’t see credit easing,” Mr. Miller said. “There is still going to be a pressure on rents. We are transitioning from rapidly rising rents, to modestly rising rents.”
Mr. Miller’s report, based on a different group of rentals than used in the Citi Habitats report, showed that the median Manhattan rent in December was 0.8% above the level of a year earlier. Studio, one-bedroom and two-bedroom rents were off slightly, while three-bedroom apartments were up 20%.
Superstorm Sandy had the effect of strengthening some segments of the Manhattan market, brokers said. It cut the supply of rentals by hundreds of apartments and forced some storm victims to rent temporary or permanent apartments.
As those buildings start to come back online, they will increase the supply of rentals available in the months ahead.
At 2 Gold St., a 51-story complex with 837 apartments, has been shut down since Sandy. Since then, more than 200 tenants have either given up their apartments or asked for their deposits back, according to TF Cornerstone, which owns the building. With repairs now due to be completed before March 1, many of these apartments will soon come back on the market.
“There will be a lot of people moving downtown,” said Mark Menendez, director of rentals in Manhattan at Douglas Elliman.
Lior Blik, who runs a health-care technology company, NITHealth, was forced out of a two-bedroom apartment at 2 Gold St. by the storm and planned to move out permanently. But he is still staying at a hotel and now plans to return when the building reopens. He said that other apartments he found that were similar to the one he rented for about $5,000 a month were now too expensive, at $7,000 or $8,000 a month.
At the top end of the market, rents soared in December. The Elliman report said that “super-luxury” rents—the most expensive 5% of all rentals—were up an average of 39.6% in December from a year earlier. The median rent was up 22%.
Itzy Garay, a leasing director at Town Residential, said that both Sandy and the rush by home sellers to close deals in December before tax laws changed were factors. At 165 Charles St., a glass tower facing the Hudson River in the West Village, a two-bedroom apartment listed last month by Bill Kowalczuk, a Town broker, rented at the end of December for the full asking price of $27,500, far more than similar apartments rented for a few years ago.
There were three competing offers. One was by a renter unable to move into a rental building in TriBeCa that was storm-damaged; another had just sold an apartment to meet the tax deadline; and the third was an renter from out of town. The renter displaced by Sandy got the lease.
