By Roland Li
Manhattan rents are shot up as vacancy rates remained low, according to second quarter reports released on Friday by Citi Habitats and Prudential Douglas Elliman.
Citi Habitats reported rent increases between 2.4% to 4.9% for studios, one, two and three bedrooms, compared to the first quarter of 2011. Rents were up between 9.1% and 11.3% compared to the second quarter of the previous year. The data is based on Citi Habitats’ closed transactions during the time periods.
The brokerage had a vacancy rate of 0.72%, the lowest number since the firm began tracking the data in 2002. Soho and Tribeca had the least vacant apartments, with a vacancy rate of 0.37%.
“A lot of current tenants are getting sticker shock,” said Gary Malin, president of Citi Habitats, adding that lack of concessions drove renewal leases even higher. “The market’s very competitive.”
He cited the recovery of the regional economy and seasonal patterns as factors for intense demand, adding that bidding wars had occurred for some listings. The relatively flat sales market and difficulty in obtaining financing also drove more people to rent, said Malin.
The new developments that Citi Habitats is marketing reflect strong activity. The Continental in midtown is 84% leased, and Extell Development Co.’s Upper West Side buildings the Ashley and the Aldyn are 97% and 80% leased, respectively. The Addison, a new Brooklyn rental with 271 units, is 48% leased after coming on the market in April. J.D. Carlisle’s 301-unit Beatrice is 99% leased. No figures have been released for the firm’s high-profile, Frank Gehry-designed 8 Spruce Street, developed by Forest City Ratner, but brokers said that activity has been brisk.
Elliman’s report had an average rental price of $3,465 and a median rental price of $2,896. Both numbers were down from the previous year, but when concessions were considered, average rents were up 3.5% and median rents were up 7%, compared to the previous year. Only 3.4% of new rentals had concessions, which typically include a month of free rent or the payment of a broker’s fee.
“Most of the new inventory introduced in 2008 to 2009 has now been absorbed and demand has been strong throughout Manhattan with very low vacancies,” said Dottie Herman, president and CEO of Prudential Douglas Elliman. “This should lead to an improvement in pricing looking forward, especially in the third quarter, which is considered to be the height of rental season.”
Traditionally, the summer months are the busiest rental period, as recent college graduates and job hunters create an influx of prospective tenants, and many leases end.
According to Elliman, apartments stayed on the market for an average of 33 days, down from 53 days in 2010. Active listing inventory dropped by 11%, from 4,972 units to 4,427.
“I think it’s premature to call the market booming. But clearly, rents are rising,” said Jonathan Miller, president and CEO of Miller Samuel, which prepared the Elliman report.
The 7% increase in median increase was consistent with the previous two quarters, he said, but noted that inflation-adjusted rents are still 19% below historic norms, and the market’s improvement was compared to recession lows. Also, Miller noted that the some of the increase in pricing was due to larger units renting, compared to previous quarters.
Nonetheless, both statistics and recent transactions demonstrate that the market has tilted heavily in the landlord’s favor.
“There’s a sense of urgency,” said Yuval Greenblatt, an executive vice president of Prudential Douglas Elliman. He noted that a recent listing on Greenwich Street closed with a monthly rent of $8,700, $200 more than the asking rent. At 20 Pine, a unit that had previously rented for $3,500 was now being rented for $5,000.
While some new rental buildings have recently come on the market, such as 25 Broad Street, a 305-unit conversion in the Financial District, many planned projects were frozen by the recession.
“I just don’t see a lot of supply coming on the market,” said Greenblatt. “There’s nothing to really drive the market down.”