Big drop in rental prices in Manhattan attracts younger residents

Manhattan real estate could take a turn as new rentals rose for the first time in over a year and sales activity began to increase after the Covid collapse.

A sharp drop in rental prices appears to be attracting new, younger tenants to the city, even as office workers and wealthy New Yorkers stay in the more rural suburbs and resorts. New leases in Manhattan rose 33% in October, making it the best October in 12 years, according to a report by Douglas Elliman and Miller Samuel.

The typical rent paid for apartments, including discounts, or the median effective net rent, fell 19% from a year ago to $ 2,868 – a record low. Small apartments, which are aimed at young tenants, have fallen the most. The price of studios fell by 21% and that of one-bedroom apartments by 19%.

“I think we’re at a tipping point where the consumer is starting to come back to town,” said Jonathan Miller, CEO of Miller Samuel. “The sellers are slowly recalibrating values, and the lower prices are starting to attract more people.”

Manhattan real estate still faces major challenges. There were 16,145 apartments not rented in October – a record high. The vacancy rate, which generally hovers around 2%, now exceeds 6%. All those empty apartments mean that landlords will have to keep lowering rents and offering incentives to attract people to the city.

On average, landlords offer more than two months of free rent, and more than 60% of new leases in October had some form of incentive or discount, according to the report. Apartments are on the market for an average of 33 days, compared to 26 days a year ago.

Yet even the Manhattan sales market is starting to shake after a dismal spring and summer. Brokers say elections and recent vaccine news have sparked a surge in screenings, inquiries and buyer interest. Sales contracts between Nov. 1 and Nov. 10 jumped 21%, according to Garrett Derderian, director of market intelligence for brokerage firm Serhant.

While prices in the sale market have not fallen as much as the rental market, brokers say that even a 5% to 10% reduction in sale prices is enough to attract buyers who expect a best entry point to real estate in Manhattan in years. .

“The market may have reached a turning point, where the uncertainty surrounding the presidential election is behind us and a possible vaccine is on the horizon,” Derderian said. “Many buyers who have been watching the lower prices and increased negotiations from the side seem ready to enter the market, and many have already done so, understanding that once a vaccine is found, the market will change again.

Manhattan could still have a tough winter with more cases of the virus and businesses preferring to keep most of their workforce at bay. New York City and New York State face high unemployment and multibillion-dollar budget holes, which will need to be addressed through tax increases, service cuts, or both, resulting in could make the city less attractive to buyers.

And with the average rental price for a one-bedroom apartment still above $ 3,200 – more than double the national average – Manhattan is still far from affordable for many younger renters. Still, experts say October’s increases could spark a long, slow recovery for the nation’s largest real estate market.

“A lot of things will have to happen for New York to come back,” Miller said. “It will be a multi-year process.”