Real Estate Weekly
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With record building underway, the race is on to move apartment stock

The New York Building Congress recently released information on the amount of construction permits issued last year — and the numbers were telling.

The DOB authorized the construction of 56,528 residential units in 1,998 buildings in 2015, an almost 180 percent increase from the 20,329 units in 1,513 buildings that were permitted in 2014, and marking the sixth consecutive year in which the number of permitted residential units has risen from the prior year.

The 2015 total also easily surpassed this century’s previous high-water mark of 33,911 units, which was achieved at the height of the last building boom in 2008.

“The number of residential permits issued in New York City last year was nothing short of epic, and you don’t reach an amount that large without a number of factors working in the City’s favor,” said New York Building Congress president Richard T. Anderson, who noted that the surge was in part due to developers applying for 421-a permits in advance of the program expiring.

Richard Anderson
Richard Anderson

With 46 percent of all permitted residential units in 2015, Brooklyn maintained and strengthened its distinction as the City’s hottest borough.

In claiming the top spot for the fourth consecutive year, Brooklyn was approved for more residential permits than Queens and Manhattan put together — and nearly five times the combined total of the Bronx and Staten Island.

In Brooklyn, 26,026 residential permits were issued last year, up from 7,551 in 2014.

In Queens, the number increased from 4,900 in 2014 to 12,667 last year. Similarly, Manhattan jumped from 5,281 in 2014 to 12,612, and the Bronx from 1,885 to 4,682.

Permits for residential units in Staten Island, which perennially produces the least amount of new housing, fell from 712 permits in 2014 to 541 in 2015.

With so many units coming online in the next couple of years, the future of the rental market looks bright for the continual influx of residents to Brooklyn.

In the meantime, Manhattan renters are being more choosy about signing a lease, choosing to take more time finding a place or taking landlord incentives instead of higher prices.

The most recent numbers in the rental market showed that despite last month’s decline in rents after two years of increases, overall Manhattan rents were a bit higher in April, according to Douglas Elliman’s April rental market reports.

With the market experiencing higher inventory and vacancy as well as more concessions, Douglas Elliman is expecting a “choppy” price trend over the next several months.

In Brooklyn, rents rose for the fourth consecutive month with bigger gains seen in smaller-sized apartments, while marketing times held steady as landlords increased their use of concessions.

In northwest Queens, rents slipped for the fourth time in five months. Larger apartments and the luxury market saw weaker conditions, and despite softer rent trends, the average marketing time was five days faster than last year.

Hal Gavzie
Hal Gavzie

“We’re very busy with customers, they’re taking a little longer looking at properties before making a decision,” said Hal Gavzie, executive manager of leasing at Douglas Elliman, on Manhattan renters. “Price-wise, rents have increased slightly, but that’s pretty much tied to seasonality.”

Incentives remain big among landlords, and especially for new developments, a fact that could be responsible for skewing price points, said Gavzie.

Meanwhile, in Brooklyn, agents have been very busy with renters who are quicker to lock down a lease than Manhattan renters.

With the peak summer season quickly approaching, and a lot of inventory still on the market, apartments need to be priced right if they want to move them quickly, said Gavzie.

“I do think with both Manhattan and Brooklyn, if apartments are priced well, they’re moving; whereas if they’re pushing it a bit with prices, those units are sitting a bit,” he said.

“Hopefully, the incentives will start falling off soon, there’s still a lot of inventory out there, and we do have a lot of new development.”

Citi Habitats’ rental market analysis for April also found that when compared to March, rents increased slightly in Manhattan, while the vacancy rate rose to 1.81 percent. Landlord concessions fell, but only by 1 percent.

The slight shifts point to a very price sensitive mindset in Manhattan renters, Citi Habitats wrote in the report. Small increases in rent prices have caused a corresponding rise in the overall vacancy rate.

The average Manhattan apartment rented for $3,494 in April 2016, $21 more than it did in March, when the average rental was $3,473, according to the report. Year-over-year, average rents are also up – the average apartment rented for $3,459 during April 2015, $35 less than it did last month.

Pricing last month increased for all apartment categories, if slightly. Average rents rose 2 percent for studio and one-bedroom apartments, while they increased 1 percent for two and three-bedroom units.
Rents are also higher across the board year-over-year. When compared to April 2015, rents for studios increased the most – with a 7 percent uptick. Pricing for one and three-bedroom apartments rose 3 percent, while rents for two-bedroom units experienced a 2 percent increase.

In April, the borough-wide vacancy rate in Manhattan climbed to 1.81 percent from March’s rate of 1.79 percent. Year-over-year, the percentage of available apartments was up considerably, due in part, to landlords’ high asking rents, according to the report. In April 2015, 1.37 percent of apartments were vacant.

Looking closer at concessions, 19 percent of rental transactions brokered by Citi Habitats agents offered a free month’s rent and/or payment of the broker fee to draw new tenants in April, down a bit from 20 percent in March.

Gary Malin
Gary Malin

However, year-over-year, there is a much bigger gap. In April 2015, 11 percent of leases offered a move-in incentive.

“Last month, some landlords tested the market by curbing their use of incentives and inching up rents,” said Gary Malin, President of Citi Habitats, in a press release.

“However, with Manhattan rents still near record highs, concessions continue to boost up the market. Many of the borough’s renters have reached the limit of what they are able to pay.

“With increasing competition from other submarkets, creating a sense of ‘value’ in Manhattan is the only way to spur some tenants to act.”

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