A man enters a building with apartments available for rent on August 19, 2020 in New York City.
Eduardo Munoz Alvarez | Display Press | Corbis News | Getty Images
Manhattan apartment rents nearly doubled in December, indicating a potential turnaround in the city’s ailing real estate market.
The number of new leases signed in December jumped to 5459, up 94% compared to last year, according to a report by Douglas Elleman and Miller Samuel. The gains represent the largest increase in nearly a decade, and the third consecutive month of year-on-year rental gains.
“It’s a small step in the right direction,” said Jonathan Miller, CEO of Research and Ratings firm Miller Samuel. “The scales are still very weak. But at least they show there is demand.”
The reason for the increase in rents is the continued decline in prices. Average net effective rents – or rents that people actually pay, including discounts and incentives – fell 17% in December, to $ 2,800 a month. Landlords are offering, on average, two months of free rent to attract tenants, and many are offering more.
Brokers say three groups are driving demand. First, those who live in the city use price cuts to upgrade to larger or newer apartments. The second group includes New Yorkers who left in the early days of The epidemic In March or April but now they’re back. The third group includes couples and families who have sold their suburban real estate for big price gains and are testing the waters in the city for the first time, given better values.
However, brokers and landlords say a full recovery in Manhattan real estate is a long way off. Even with lower prices and increased rents, Manhattan still has a near-record number of empty apartments. 13,718 apartments were listed in December, more than twice the total last year. The vacancy rate of 5.5% is nearly three times the historic average in Manhattan, according to Miller.
Many landlords and buildings also keep empty apartments out of the market for fear of oversupply. Miller said that this “shadow stock” or “managed stock” means the real number of empty, un rented apartments in Manhattan is likely in excess of 20,000.
“I think we are at some point before the start of the recovery,” he said.
The main reason for the rental gains is more affluent tenants, because high-income earners have largely escaped the economic fallout of the epidemic, while lower-wage workers and service workers bear the most pain. The rents of three-bedroom apartments, which average $ 8,000 per month, rose 171% in December compared to a year ago, according to the report.
Meanwhile, actual rents for the smallest studio apartments decreased by 19% and saw significantly fewer gains in new leases.
Ultimately the strength, driven in part by the rise in the stock market, is evident in the apartment sales market. While total apartment sales decreased by 21% in the fourth quarter, sales of apartments valued at more than $ 5 million increased by 23% compared to the same quarter last year.
“It reflects Unemployment patterns“The lower wage earners have been hit the most,” Miller said.