Apartment buildings in the Upper East Side neighborhood of New York.
Victor J. Blue | Bloomberg | Getty Images
Manhattan rents hit an all-time high in December as apartment supply plummeted and landlords began demanding double-digit increases.
Average Manhattan apartment rent hit $ 4,440 in December, while the most widely observed median net effective rent (median rent including all discounts) hit $ 3,392 – the highest level on record for December – according to a report by Douglas Elliman and Miller Samuel. The median net effective rent increased by 21% compared to last year.
The surge marks a dramatic turnaround from a year ago, when there were more than 25,000 empty apartments for rent in Manhattan and even the most optimistic brokers predicted a recovery over several years. Now rents are often above pre-pandemic levels and tenants are facing sticker shock over their rent increases for this year.
“A geyser of demand”
“What started out as a trickle early last year has turned into a demand geyser,” said Janna Raskopf, a leading Manhattan rental brokerage with Douglas Elliman. “I’ve been doing this for 14 years and it’s absolutely unprecedented.”
Raskopf and other brokers say demand is driven largely by college graduates getting new jobs in Manhattan. Many returned to the city last spring, when Mayor Bill de Blasio announced the city would reopen on July 1. Even though only about a third of office workers have returned to their Manhattan office, the wait to return to the office continues. to bring in waves of people, say brokers.
New Yorkers who have sold their apartments and moved their tax residence to Florida or another low-tax state are also renting to keep a part-time foothold in the city. Raskopf said even the very wealthy sometimes choose to rent rather than buy in Manhattan, waiting on the sidelines until they see how the city’s economic and cultural future unfolds after the pandemic.
All the demand created a sudden shortage of supply. A year ago, the vacancy rate – normally around 2% for Manhattan – was 11%. Inventories had plunged 81% in December 2021 from December 2020, according to the report.
Today, the vacancy rate is exceptionally low at 1.7%, with only 4,700 apartments available. Supply is so low that overall rental activity fell by 40% in December compared to last year, due to a shortage of rental apartments.
Bidding wars, double-digit rent increases
Raskopf said she recently listed a two-bedroom apartment for $ 12,000 a month. She immediately showed the apartment to 26 people and had a bidding war between the tenants. She said it would likely be rented 15% above asking price, like many apartments she has recently put up for sale.
“Forget about the Covid discounts,” she said. “People know that the listing price is usually just the starting point now, and they’ll have to bid higher to get it. I would say over half of my Q4 registrations were requested or more. “
Existing tenants also experience large rent increases. Brokers say tenants who got good deals in 2020 and early 2021 are starting to see their leases expire. Landlords see they can increase rents by 20-30% or more depending on the market – and are eager to recoup their lower income or losses during the pandemic.
The largest rent increases are downtown, with a median rent increase of 28%, to $ 4,100. Rents for small studios and one-bedroom apartments increased the fastest, with studio rents increasing by around 21%.
As many landlords try to work with existing tenants to limit increases, some new tenants are quickly shut out of a market they could finally afford in 2020. Higher rents shatter early hopes that Manhattan would become more affordable for a new generation of young first-time tenants.
“The owners are trying to compromise,” she said. “But they had to keep paying their expenses and taxes during the pandemic and now they can come back. Some tenants just say ‘I can’t afford a 20% increase’ and they leave.