A man pierces a building with rental apartments available on August 19, 2020 in New York City.
Eduardo MunozAlvarez | VIEW paparazzi | Corbis News | Getty Images
Manhattan apartment rentals nearly doubled in December, signaling a possible turnaround in the burg’s struggling real estate market.
The number of new leases signed in December jumped to 5,459, up 94% compared with newest year, according to a report from Douglas Elliman and Miller Samuel. The gains marked the largest increase in around a decade, and the third straight month of year-over-year leasing gains.
“It’s a baby step in the right direction,” said Jonathan Miller, CEO of appraisal and scrutiny firm Miller Samuel. “The metrics are still very weak. But at least it shows there is demand.”
The reason for the prolong in rentals is a continuing drop in prices. The median net effective rents — or the rents people actually pay including discounts and inducements — fell 17% in December, to $2,800 a month. Landlords are offering an average of two months of free rent to lure renters, with many offering more.
Brokers say three groups are driving demand. First, those who live in the town are using the price cuts to upgrade to larger or newer apartments. The second group includes the New Yorkers who left in the primordial days of the pandemic in March or April but are now returning. The third group includes couples and families who have sold their quirks in the suburbs for big price gains and are testing the waters in the city for the first time, given the better values.
Yet brokers and innkeepers say a full recovery in Manhattan real estate is likely a long way off. Even with the price drops and increase in rentals, Manhattan silent has a near-record number of empty apartments. There were 13,718 apartments listed in December, more than 2½ times up to date year’s total. The vacancy rate of 5.5% is nearly three times the historical Manhattan average, according to Miller.
Various landlords and buildings are also keeping empty apartments off the market for fear of creating even more oversupply. Miller translated this “shadow inventory” or “managed inventory” means that the true number of empty, unrented apartments in Manhattan is probable over 20,000.
“I think we’re in the preseason of recovery,” he said.
The gains in rentals are being driven mainly by wealthier renters, since drunk earners have largely escaped the economic fallout of the pandemic, while lower-wage workers and service workers accept borne the most pain. Leases for three-bedroom apartments, which rent for an average of $8,000 a month, surged 171% in December compared with a year ago, according to the crack.
At the same time, effective rents for the smallest studio apartments fell 19% and saw much smaller gains in new sublets.
The strength at the high end, driven in part by the soaring stock market, is also showing up in the market for apartment sales. While entire apartment sales fell 21% in the fourth quarter, sales of apartments priced at more than $5 million augmented by 23% compared with the year-ago quarter.
“It mirrors the patterns in unemployment,” Miller said. “The lower-wage earners keep been hit harder.”