By Orlando Lee Rodriguez
Rising rents are fueling demand among buyers for large Manhattan apartments, according to first quarter reports.
More families, developers say, are opting to stay in the city, rather than migrate to the suburbs.
“We are seeing huge demand for larger units where families want to stay in NY and locals who live here want to stay,” said Laurie Golub, chief operating officer of HFZ Capital.
“As new schools open, like the Avenue School downtown and some of the NYC public schools that have been approved, where there is demand to stay families are driving prices of larger units up.”
A year end study compiled by appraisal firm Miller Samuel, also found the pricing trend to be on an upward swing.
Douglas Elliman reported their strongest fourth quarter sales in more than 25 years coupled with the lowest inventory in their sales portfolio in more than 10 years.
“Listing inventory fell to its lowest level since 2001, when we began tracking it,” said Jonathan Miller, CEO of Miller Samuel.
“Tight credit is one of the key reasons for this fall in inventory. Sellers, when they sell, become buyers. The overall takeaway from the fall of 2012 is that record sales and falling inventory could very well result in rising prices of homes in 2013.”
As is traditional during the month of January, a slew of real estate organizations released their year-end reports and New Year forecasts.
Most reported growth in 2012 of Manhattan apartment prices, with the borough experiencing the greatest appreciation gains in the country. This, as sales inventory continued to fall on the island.
Rents on average grew overall between 4 to 5 percent during 2012 in New York proper, according to the annual market study of real estate value trends unveiled by Integra Realty Resources.
Residential brokerages, which issue their own internal data reports, reported significant rental increases also despite a softening in 4th quarter prices.
Over the past year Douglas Elliman reported a 10% increase in Manhattan rent, with Citi Habitats reporting a 5% rise for 2012.
“Continued demand resulted in a competitive market for apartment-seekers,” said Gary Malin, president of Citi Habitats. “Average rents are up across all apartment categories when comparing 2012 to 2011. Studio apartments rented for 4%, one and three bedroom homes both increased in price by an average of 5%.”
Differently than in past years, the effects of Hurricane Sandy increased demand for apartments during the normally slow month of December. AC Lawrence reported a 45% increase in transaction activity during the month of December over 2011.
“Our team at AC Lawrence felt some pent up demand from people who held off renting until December,” said Marc Lewis, chairman of AC Lawrence. “In past years, I’ve said ‘there are only eleven months in the rental calendar’ but because of Sandy, this was not the case. We experienced a much busier December than in the past.”
Most reports, internal and external, reported stability in vacancy rates throughout the year and into the foreseeable future.
New York City leads the nation in vacancy rates, followed by San Francisco and Boston.
“New York has been hovering in the three to 3.1 range over the last two years,” said Patrick C. Kerr, of Integra Realty Services.
“We see a fairly stable vacancy rate, in the 4% range projected over the next several years. That is also considering that there is going to be a lot of product coming online.”
Prices also rose across the river in New Jersey, but at a slower rate than Manhattan, growing by 3 percent in 2012.
“If you want to have a lower rent just hop on the PATH train and go over to Hoboken,” said Raymond T. Cirz, chairman of Integra Realty Resources. “You can reduce your rent by 25%.”
While the ‘Gold Coast’ of New Jersey saw rates rise, some saw Brooklyn rents fall, but not all.
The city’s most populous borough remains immensely popular among a younger U.S. transplant population who are driving rental activity but resisting rental increases.
According to Miller Samuel, Brooklyn transactions rose by 12.5% in December, but rents dropped by 2.6%
during 2012, with a 5 percent drop in price in December alone.
In contrast, MNS reported the opposite pricing trend in Brooklyn, seeing a 15.8% increase in prices for studios, 10.7% uptick for one-bedrooms and a 10.2% rise for two bedrooms.
What this all means in terms of data consistency will have to be hashed out over time by individual market movers. Either way, some senior executives advise younger brokers not to take all data forecasts to heart when making every single market decision.
“Forecasts are always wrong, you’re best doing the opposite,” said chief executive officer of Vornado Realty Trust, Michael D. Fascitelli. “We can’t predict the future. We don’t have a crystal ball. Your belly will tell you the right answers.”