The Manhattan residential rental market ended 2011 with a bang.
Rents in the fourth quarter were up solidly from year-earlier levels, according to market reports released Thursday. The median Manhattan monthly rent of $3,145 for all sizes of apartments was the highest median since the fourth quarter of 2006, when median rents reached $3,265, according to the quarterly report by Prudential Douglas Elliman and Miller Samuel Inc. Meanwhile, median net effective rent jumped 9.5% to $3,121 from the fourth quarter of 2010, as landlords dialed back on concessions like a month of free rent.
Separately, brokerage Citi Habitats reported that the average Manhattan rent rose 6.2% to $3,322 a month last year.
“The fourth quarter is usually the slowest period of the year,” said Jonathan Miller, CEO of Miller Samuel. “That is not what happened in 2011.”
Even the usual seasonal lull had little impact on apartment leasing activity in the fourth quarter. Typically, the number of rentals dips 17% in the fourth quarter from the third quarter, but last year’s activity cruised onward, with volume slipping just 0.7% to 7,942 new leases, according to the Prudential report.
In addition, the speed at which rentals were snapped up last year rose, nearly breaking a 15-year record. Mr. Miller said that apartments remained on the market for an average of 37 days—four days longer than the record pace of 33 days set in the second quarter of 2011.
“Last year was a rebound year,” said Gary Malin, president of Citi Habitats, which reported that a mere 10% of all the signed leases it brokered in 2011 included some form of landlord incentive, typically one month free rent or payment of the broker’s fee. That compared to an average of 31% in 2010. “Everything swung in favor of the landlord.”
In fact, according to brokerage Bond New York, which tracks Manhattan activity via its proprietary listing system, rents and inventory have nearly returned to—or in some cases have surpassed—2008 records. Last year, average monthly rent for studios hit $2,174, less than $100 below the $2,254 seen in 2008. The average for a one-bedroom unit, meanwhile, was $2,926, compared to $2,979. A two-bedroom was $3,977, compared to $4,054, and a three-bedroom was $5,577, compared to $5,261. Separately, Citi Habitats reports that average monthly rents for all sizes of apartments rose 8.4% to $3,309.
“We are still at those levels,” said Douglas Wagner, executive director of leasing at Bond New York, adding that transaction volume at his firm is up 50% so far this month from the same time in 2011. But he noteed, “it is too early to see how things shake out.”
Mr. Malin warns that layoffs on Wall Street and elsewhere could crimp the residential market, but so far there is no indication of the market taking a turn for the worse. “Right now, conditions are very stable,” he said.
Mr. Miller agrees. “I see 2012 being more of the same,” he said, adding that the rental market outperformed the sales market, which stabilized, last year. The tight lending environment has held the sales market back, he noted.