Manhattan apartment rents rose the most in five years as would-be homeowners struggling to get mortgages lingered in the leasing market, competing for space with transplants and new college graduates.
The median monthly rent climbed 7.9 percent in the second quarter from a year earlier to $3,125, according to a report today by appraiser Miller Samuel Inc. and broker Prudential Douglas Elliman Real Estate. It was the biggest jump since the second quarter of 2007, when rents rose 11 percent. The median is 4.3 percent below the peak of $3,265 in 2006, and poised to surpass it, said Jonathan Miller, president of Miller Samuel.
Stricter mortgage-lending standards and weak consumer confidence are limiting home purchases, increasing competition for rentals in the busiest period for leasing. Sales of Manhattan co-ops and condominiums totaled 2,647 in the second quarter, little changed from a year earlier, Miller Samuel and Prudential said last week.
“The consumer is being squeezed because many don’t have the option of getting out of the rental market,” Miller said. “People who can’t qualify for a mortgage have no choice so they’re stuck. That tips the balance and creates this rising demand.”
Newly signed rental deals fell 11 percent in the quarter to 7,657 as more people stayed in their apartments. The Miller Samuel and Prudential study doesn’t account for leases that were renewed.
Tenants renewing two-year leases should expect price increases of about 13 percent from June 2010, according to brokerage MNS, which also released a rental-market report today.
“There’s nothing in play at the moment that suggests that we’re going to see rents decline over the next year,” Miller said.
The smallest apartments had the largest rent increases in the quarter as tenant demand for cheaper options surged. The median monthly price of a studio jumped 15 percent from a year earlier to $2,395, while one-bedroom units climbed 8.5 percent to $3,250. Two-bedroom rents rose 5 percent to $4,298, while three-bedroom prices were unchanged at $5,295.
Christopher DosSantos had to increase his budget and change his neighborhood of choice to land an apartment. DosSantos, a law student at Fordham University, and his friend Dean Saccomanno, who’s studying dentistry at New York University, sought a two-bedroom rental in Greenwich Village for no more than $2,400 a month. They increased the limit to $3,000 after seeing the “shoeboxes” available at the lower price, said DosSantos, 23.
“We’re good friends, but it’s still important to have enough personal space when you come back to the apartment,” he said.
After another apartment-seeker beat them to a fourth-floor walk-up in the East Village, the friends took their search farther uptown, to East 26th Street near Gramercy Park. They expect to sign a lease today to rent a third-floor unit in a building with no elevator for $2,800 a month.
“That’s the blood, sweat and tears of the game,” said Corlie Ohl, a broker with Citi Habitats who helped DosSantos and Saccomanno in their search. “If you like an apartment at all, you have to move quickly, because if you don’t, you’re not going to get it.”
The jump in demand meant landlords were able to push price increases while limiting tenant concessions. Six percent of new lease agreements in June included deal sweeteners such as a month’s free rent or payment of a broker fee, according to Citi Habitats, which also released a report on the Manhattan rental market today. A year earlier, 11 percent of new deals entailed such incentives.
Citi Habitats said rents averaged $3,437 for the quarter, a 5.2 percent increase from a year earlier, topping the previous record of $3,394 set in May 2007. The vacancy rate was 0.97 percent, compared with 0.72 percent in the second quarter of 2011.
“The most important thing is to come prepared if you want to rent in this market,” said Gary Malin, president of the New York-based brokerage. “Without all the necessary paperwork and all the necessary funds to secure an apartment on the spot, you’re putting yourself at a severe disadvantage.”
When Graham Marvin spotted a $1,895-a-month, two-bedroom walk-up on the Upper East Side, he applied immediately, armed with paperwork showing that his parents would act as guarantors. Marvin, 22, a recent graduate of NYU’s film school who works for a company creating a show for the History Channel, still didn’t get the place.
The rejection led him farther east — away from the subway, restaurants and bars — to an “awkwardly shaped” unit on 82nd Street near York Avenue that he and a friend agreed to rent for $1,900. The second-floor apartment in a building without an elevator requires a walk through one of the bedrooms to get to the kitchen.
“It’s nice,” Marvin said. “It’s not quite as nice” as the first apartment.
Across Manhattan, rents at buildings with doormen started at an average of $2,585 a month for studios and were as high as $7,095 for three-bedroom units, Citi Habitats said. Studios in buildings without elevators rented at an average of $1,973, while one-bedrooms in those properties leased for an average of $2,575.
The downtown neighborhoods of Soho and Tribeca commanded the highest rents for almost every size apartment, with one- bedrooms leasing for an average of $3,877, two-bedrooms for $6,290 and three-bedrooms for $9,012, Citi Habitats said. Studios in those downtown neighborhoods rented for an average of $2,500 a month, a price topped only by Chelsea, where studios rented for $2,553 in the quarter.
On the Upper West Side, average rents ranged from $1,980 for a studio to $6,339 for a three-bedroom apartment.