By Konrad Putzier
Manhattan’s rental market surged for the seventh month in a row in September as the vacancy rate edged closer to zero.
The median rent rose by 5.4 percent year-over-year to $3,262, according to Miller Samuel’s report for Douglas Elliman. Manhattan rents even outpaced the famously hot residential sales market, whose median price had grown 4.2 percent year-over-year in the third quarter.
The vacancy rate dropped to a staggeringly low 1.76 percent, down from 2.66 percent a year ago. Rising rents and shrinking vacancy rates are another indicator that Manhattan is suffering from a rental supply squeeze. While demographics, job growth and tight mortgage lending are driving up demand for rentals, new supply has all but dried up.
“When you look at the new development market in Manhattan, it’s almost entirely condo. If it’s not condo, that’s because the site was purchased a number of years ago,” Jonathan Miller of appraisal firm Miller Samuel told Real Estate Weekly in a recent interview. High land prices often make it unprofitable to build rental towers, meaning developers increasingly revert to condos.
Still, Douglas Elliman’s director of rentals Luciane Serifovic said it’s too early to call out a rental crisis. For starters, she has noticed a growing number of New Yorkers sharing apartments, keeping their costs down despite rising rents.
More importantly, a growing number of Manhattanites moving to Brooklyn and Queens, where supply is more abundant and rents are lower. In Brooklyn, the number of new rentals increased by 32.9 percent year-over-year to 736 and in Queens by 113 percent to 213.
Unlike Manhattan, median rents in Brooklyn and Queens declined year-over-year – by 3.8 and 6.2 percent respectively. Serifovic attributed this to the high rent growth over past quarters. “Brooklyn has reached some sort of an affordability threshold,” she said. “There’s just so much (landlords) can get, and rents have hit this plateau that won’t go for a while.”
A slight surprise was the weak showing of Manhattan’s luxury rental market in September. The median rent for the top ten percent of the market fell by 23.5 percent year-over-year. This drop reversed the trend of the past few years, which has seen Manhattan’s luxury market outpace the lower tiers on the back of growing foreign demand. According to Serifovic, declining luxury rents are a symptom of the booming luxury condo market. “If the sales market is strong, it competes with the rental market,” she said.