Manhattan Rental Market : Glass Half Full?

August 26, 2009

I like to think of myself as a glass half full person.  I have noticed some internet buzz recently about the “muted” summer rental season in Manhattan.  I have to concur with the worthy firms who have compared 2008 and 2009 summer rental numbers to determine that both prices and volume are lower this year, in some cases by more than 10%.  I’m certain that this is not a bad thing!  Fall 2009 will represent opportunity all over the Manhattan rental market.

B&WSkylineEmployment is the driving force behind the Manhattan residential marketplace, and as long as jobs are not being created or expanded, this year’s apartment inventory nestles into a new plateau. 

There is still high demand for great property.  We have seen multiple bids and races to get money down first on premium rental listings at a number of different price points.

Only two weeks ago, my head was spinning at the number of landlords who were turning down low offers due to increased demand!  This year, however, there are vacant units which remain un-rented on all sides of those premium homes.  For landlords and developers who have gone above and beyond to create special apartments with solid finishes and a few splashy perks, vacancies remain minimal, provided those landlords have maintained conservative pricing.  Clearly this is not the market to expect super high prices to fall in line with the very high finishes.  It has proven not to be the market in which tenants can name their price and expect to be taken seriously.

As summer flows into fall, it is clear that there will continue to be a higher than normal vacancy rate in Manhattan. Most of the city’s new hires have already landed and have signed their leases.  Some first year corporate attorneys are finding that their employment is deferred until January, so they may wait until November or December to seek shelter, watering down the annual frenzy known as August demand. Landlords will continue to pay broker fees and tempt new tenants with free rent and other perks.  The real prospective winners this fall will be the tenants.  The discretionary mover who is looking to trade laterally for better space still has some time to discover just how much more space or what finer kitchens, bathrooms and roof decks they can find for the same rent prices (or even a little less, if lucky).  Manhattan renters who have gone out in search of major improvements for a lower price have been disappointed, however, those who might have been driven to outer boroughs, upstate or New Jersey by astronomical prices of 2004 – 2007 will discover a much more favorable rental climate in the City.

So what if prices are down and vacancies are a little higher?  There are some good deals and some great deals to be had all over Manhattan, and the better brokers who spend all of their professional time discerning value from hype will make up in volume what they may lose in price point.  There’s a light in the market, more than in the first half of the year.  From its glow I can pretty well make out that the glass is, in fact, half full!

Douglas Wagner
Benjamin James Real Estate

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