A rental apartment sign is displayed outside an apartment building in Hells Kitchen as the city resumes Phase 4 reopening after restrictions were imposed in New York City on August 18, 2020 to slow the spread of the coronavirus.
Alexi Rosenfeld | Getty Images
The number of rental apartments in Manhattan tripled in September. Almost 16,000 apartments are vacant, according to a new report.
According to Douglas Elliman and Miller Samuel, 15,963 apartments were rented in September, up from 5,299 last year. The vacancy rate in Manhattan, which is typically between 2% and 3%, is now close to 6%.
With the flood of empty apartments, landlords are forced to offer ever higher incentives and ever lower rents in order to attract tenants. Listing discounts have tripled to 4.5%, and landlords are offering new tenants an average of two months’ rent.
Prices are also falling. Median effective net rents, including concessions, decreased 11% to $ 3,036. The big question for New York City, faced with a population decline, higher crime rates, and high unemployment, is whether prices can drop enough to lure residents back to the city.
“I don’t think we’re there yet,” said Steven James, President and CEO of Douglas Elliman’s New York Broker. “I think we still have a few ways to go. The consumer knows that landlords are on the ropes and they know they have them.”
Rents in Manhattan remain high by national standards. The average one-bedroom rental in September was $ 3,307, while the two-bedroom rental averaged $ 4,817. The lower end of the market has been hit particularly hard as poorly paid service and restaurant workers have borne the brunt of New York’s economic troubles. The rents for studio apartments have fallen by 14%.
Rents make up two-thirds of the homes in Manhattan, the country’s largest rental market. As rents fall and more homes become vacant, the pain could spill over to smaller, less capitalized landlords, as well as mortgage lenders and banks. It could also affect property tax income – the largest source of income for New York City – since landlords don’t have rental income to pay their taxes.
“The chain reaction is going to be tough, especially for newer landlords who haven’t been through this before,” said James.