Rental of apartments in Manhattan almost doubled in December

Rental of apartments in Manhattan almost doubled in December, signaling a possible change in the troubled real estate market in the city.

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. Earnings marked the largest increase in almost a decade and the third consecutive month of year-on-year leasing earnings.

“It’s a step for babies in the right direction,” said Jonathan Miller, CEO of assessment and research firm Samuel Miller. “The measures are still very weak. But at least there is demand.”

The reason for the increase in rent is a continuous 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 offer an average of two months of free rent to attract tenants, many offering more.

Brokers say that three groups determine the demand. First, those who live in the city use price reductions 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 great price gains and is testing the waters of the city for the first time, given the better values.

However, brokers and landlords say a full recovery of Manhattan real estate is probably far away. Even with falling prices and rising rents, Manhattan still has an almost record number of empty apartments. In December, 13,718 apartments were listed, more than 2 times the total last year. The 5.5 percent vacation rate is almost three times higher than the historical average in Manhattan, according to Miller.

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

“I think we’re in the pre-season recovery,” he said.

Earnings from rents are mainly caused by richer tenants, as high-wage workers have largely escaped the economic consequences of the pandemic, while lower-wage and service workers have suffered the most pain. Leases for three-bedroom apartments, which average $ 8,000 a month, rose 171 percent in December from last year, according to the report.

At the same time, actual rents for the smallest studios fell by 19% and recorded much lower gains in new leases.

High-level power, partly driven by the growing stock market, also appears in the apartment sales market. While total apartment sales fell 21 percent in the fourth quarter, apartment sales at more than $ 5 million rose 23 percent from a quarter last year.

“It reflects the patterns of unemployment,” Miller said. “Those with lower wages were more severely affected.”