Manhattan apartment rentals nearly doubled in December

Apartment rentals in Manhattan nearly doubled in December, signaling a possible recovery in the city’s struggling real estate market.

The number of new leases signed in December rose to 5,459, up 94% from last year, according to a report by Douglas Elliman and Miller Samuel. The gains marked the largest increase in nearly a decade and the third consecutive month of annual rental growth.

“It’s a small step in the right direction,” said Jonathan Miller, CEO of the Miller Samuel evaluation and research firm. “The parameters are still very low. But at least it shows that there is a demand.”

The reason for the increase in rentals is a continuous drop in prices. Median net effective rents – or the rents that people actually pay, including discounts and incentives – fell 17% in December, to $ 2,800 a month. Landlords offer an average of two months’ rent free to attract tenants, and many offer more.

Brokers say three groups are driving demand. First, those who live in the city are using the price cuts to upgrade to larger or newer apartments. The second group includes New Yorkers who left in the early days of the pandemic in March or April, but are now returning. The third group includes couples and families who have sold their properties in the suburbs for big price gains and are testing the city’s waters for the first time, given the best values.

Still, brokers and landlords say a full recovery in Manhattan real estate is likely far away. Even with the price drops and the increase in rentals, Manhattan still has a near-record number of empty apartments. There were 13,718 apartments listed in December, more than 2½ times the total of last year. The 5.5% vacancy rate is nearly three times Manhattan’s historic average, according to Miller.

Many landlords and buildings also keep empty apartments out of the market for fear of creating even more oversupply. Miller said this “shadow inventory” or “managed inventory” means the actual number of empty, unlet apartments in Manhattan is likely over 20,000.

“I think we are in the preseason of the recovery,” he said.

Rent increases are mainly driven by better-off tenants, as high incomes have largely escaped the economic fallout of the pandemic, while low-paid and service workers have suffered the most. Leases for three-bedroom apartments, which average $ 8,000 per month, jumped 171% in December from a year ago, according to the report.

At the same time, the effective rents of the smaller studios fell 19% and saw much smaller gains in the new leases.

The strength of the high-end segment, driven in part by the surge in the stock market, is also evident in the apartment sales market. While overall apartment sales fell 21% in the fourth quarter, apartment sales over $ 5 million were up 23% from the quarter last year.

“This reflects trends in unemployment,” Miller said. “Low-paid workers have been hit hardest.”