Manhattan’s rent surge is cooling

NEW YORK: The great Manhattan rent surge of 2019 is tapering off.

Apartments leased for a median of US$3,409 in October, up 0.7% from a year earlier, according to a report by appraiser Miller Samuel Inc and brokerage Douglas Elliman Real Estate. It was the second consecutive increase of less than 1%. Before that, rents had climbed at least 3% in almost every month this year.

Manhattan’s leasing market has become an attractive place for people delaying a home purchase, and landlords – who just a year ago worried about filling empty units – have benefited from the increased demand. They scaled back move-in incentives and pushed up rents, even getting a median 6.5% increase in July.

But as sales prices fall, some fence-sitters are making purchases. The tenants left behind, meanwhile, are stretched to the limit of what they can spend and are pushing back on landlords who want to raise rents further.

“My sense is that rents are peaking,” said Jonathan Miller, president of Miller Samuel. “There’s a lot of pressure on affordability.”

Signs of a cooling market are already there. Newly signed leases slipped 13% in October, the sixth year-over-year decline in seven months. Of those deals, 37% came with a landlord concession, such as a month’s free rent. That’s a large enough share to suggest that sweeteners are still necessary to attract tenants, Miller said.

The vacancy rate, now at 2.03%, has increased over the previous year for the fourth consecutive month, Miller Samuel and Douglas Elliman said. The higher vacancies suggest that tenants are pushing back on Manhattan landlords who have stretched rents too far, said Gary Malin, president of brokerage Citi Habitats, which also released a report on the market yesterday.

Median rents climbed year over year in all but two Manhattan neighbourhoods tracked by Citi Habitats. In the Tribeca and Soho neighborhoods, the priciest in the borough, leasing costs jumped 10% from last October to US$7,990. Rents are up 15% in Chelsea to US$4,830, and on the Upper East Side, they climbed 7.3% to US$3,730, according to the brokerage.