The rental market in NYC, which has long seen average rents higher than almost any other major US City, has softened in the past six to twelve months, especially in the higher end of the market.
The median rent in Manhattan in December 2016 was still effectively higher than it was the previous year: $3,388/month as compared to $3,350. However, factoring in rent concessions and broker fees costs, which owners are increasing willing to pay in order to order to attract renters with no-fee listings, this number becomes $3,291, an overall 1.55% decline.
Currently, the NYC rental market has vacancy of roughly 3%, and concessions are being offered on 30% of units currently on the market. Those properties that continue to be priced truly at market continue to see movement in getting leased quickly. However, a large majority of the units on the market are priced at least 5% above current market rents. Overall, the average rent rate for January 2017 in Manhattan has decreased compared to the same time last year, a trend largely due to an increased amount of higher end inventory, where the top 10% of the market has seen the most dramatic decrease (-4.76% compared to 2016). The lower end of the market remains competitive, likely due to increased demand and lower inventory.
Most striking in the current NYC rental market it the unusually high number of listings now offering incentives such as free rent, no-fee, and other concessions to renters - far more than we have seen in previous years. Some believe this trend is due to a huge influx of luxury inventory in the rental market. "Developers have been flooding the market with high-end rental buildings targeted towards yuppies and equipped with amenities like gyms, game rooms, and pet spas. But the supply surge means renters now have a wealth of options to choose from, and landlords can’t expect to command the same premiums they could just a year ago." The Real Deal asserts that more and more "New York City residential landlords are continuing to rely on renters’ incentives to keep vacancies at bay, a trend that is expected to become more widespread throughout 2017."
However, while the average rents for two-three bedrooms is falling, rents for studios and one-bedrooms in some areas are actually rising. With a glut of luxury inventory, there has been an increase in demand for cheaper and less luxury apartments. "New York’s rental market is in the doldrums and the luxury market has taken the worst of it," The Real Deal reported last week. "Luxury rents have fallen or stagnated in most neighborhoods while non-luxury rents continued to rise, causing the price gap between them to shrink." CurbedNY confirms this trend: "the demand for less pricey and often smaller apartments remains strong while the market for more expensive and larger apartments is less aggressive."
Overall, it is clearly a renters market, and is a great time to look for deals in the form of free rent, owners willing to pay broker fees, and other incentives. While rents remain strong in the lower end of the market, if you currently rent in the higher end, you may be able to upgrade to a larger apartment or better location without a significant increase in your monthly rent.