A man enters a building with rental apartments available on August 19, 2020 in New York City.
Eduardo MunozAlvarez | SHOW press | Corbis News | Getty Images
Apartments in Manhattan nearly doubled in December, signaling a possible turnaround in the city̵
The number of new leases signed in December rose to 5,459, a 94% increase over 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 straight month with lease gains from year to year.
“It’s a baby step in the right direction,” said Jonathan Miller, CEO of assessment and research firm Miller Samuel. “The targets are still very weak. But at least it shows that there is demand.”
The reason for the increase in rents is a continued fall in prices. The median net effective rent – 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 of free rent to entice tenants, where many offer more.
Brokers say three groups are creating demand. First, those who live in the city use the price reductions to upgrade to larger or newer apartments. The second group includes those New Yorkers who traveled 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 water in the city for the first time considering the better values.
Still, realtors and landlords say a full recovery on Manhattan property is likely far away. Even with falling prices and rising rents, Manhattan still has an almost record-breaking number of vacant apartments. There were 13,718 apartments built in December, more than 2 times the total last year. According to Miller, the unemployment rate of 5.5% is almost three times the historical average in Manhattan.
Many landlords and buildings also keep empty apartments away from the market for fear of creating even more oversupply. Miller said that this “shadow furniture” or “managed furniture” means that the true number of empty, unrented apartments in Manhattan is likely to be over 20,000.
“I think we are in the pre-season for recovery,” he said.
The gains in rents are mainly driven by wealthy tenants, as high-wage earners have largely avoided the economic downturn in the pandemic, while lower-wage earners and service workers have borne the most pain. Rents for 3-bedroom apartments that rent for an average of $ 8,000 a month rose 171% in December compared to a year ago, according to the report.
At the same time, effective rents for the smallest studio apartments fell by 19% and saw much smaller gains in new leases.
The strength at the high end, partly driven by the soaring stock market, is also evident in the market for apartment sales. While total apartment sales fell 21% in the fourth quarter, apartment sales by more than $ 5 million increased by 23% compared to the quarter last year.
“It reflects the patterns of unemployment,” Miller said. “The lower wage earners are hit harder.”