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Manhattan’s hot apartment market cools a bit

Vacancy rates for rental apartments in the hot Manhattan market actually edged up last month, according to reports from two city residential brokerages. Moreover, it hit the highest level in nearly three years, according to one report from Citi Habitats.

Both Citi Habitats and Prudential Douglas Elliman found an overall decline in rental activity in Manhattan. While some slowing is normal at this time of year, executives at both firms agreed that it had been exacerbated this year by several other factors, including rent fatigue and a slack economy.

Vacancy rates in Manhattan for October hit 1.39%, the highest since February of 2010, according to Citi Habitats, helped in part by average rents that are still $103 higher than they were a year ago.

“The economy is still doing poorly,” said Gary Malin, president of Citi Habitats. “If you read any of the most recent reports, hiring is not robust.”

He also speculated that some of the decline in demand for units may stem from more people taking advantage of low interest rates and opting to buy a place instead of rent.

Between September and October, vacancies rose in every Manhattan neighborhood except the East Side, where it went the other direction, falling from 1.97% to 1.48%, according to Prudential Douglas Elliman. Its more detailed report saw an average vacancy rate of 2% last month. In another sign of weakness, the report noted that the number of leases with concessions, such as a month of free rent, hit 4% of the market in October—double the figure of the previous month.

Mark Menendez, the company’s director of rentals, said the East Side has the biggest residential selection and also offers a lot of value, something to which renters might have started to pay more attention.

Mr. Menendez has some doubts about the notion that rising vacancies might reflect a shift toward more people buying homes. He noted that even though interest rates are low, banks are still hesitant to lend. As evidence of the impact of that reluctance, he pointed to a 19% increase in luxury rentals in October by people who presumably had the means to buy if they wanted to.

“A lot of people are in a holding pattern right now,” Mr. Menendez said. “No one’s ready to pull the trigger.”