Manhattan apartment rents jumped 9.5 percent in the fourth quarter as landlords emboldened by increasing demand cut concessions and pushed price increases in what’s traditionally the slowest leasing season.
The median effective rent, or what tenants pay after landlord-sponsored incentives, rose to $3,121 a month from $2,849 a year earlier, according to a report today by appraiser Miller Samuel Inc. and broker Prudential Douglas Elliman Real Estate. The number of new leases increased 10 percent to 7,942 as competition made tenants quicker to sign deals.
Stricter mortgage-lending standards and weak consumer confidence are limiting home purchases and driving demand for rentals, said Jonathan Miller, president of New York-based Miller Samuel. Manhattan apartment sales fell 12 percent in the fourth quarter from a year earlier as Europe’s debt crisis and sluggish U.S. job growth dimmed buyer appetites, Miller Samuel and Prudential said on Jan. 4.
“It’s somewhat unprecedented that you have this robust rental market and yet we still have this economy that is not fully recovered,” Miller said in a telephone interview. “It’s because credit remains very tight.”
Apartments were rented within 37 days on average in the fourth quarter, the second-fastest pace in 17 years of Miller Samuel data. The three months through June was the quickest period, with properties averaging 33 days on the market.
Manhattan leasing tends to slow in the colder months, when corporate hiring winds down and there are fewer new college graduates searching for housing, Miller said. Over the last 20 years, the number of fourth-quarter leases has declined an average of 18 percent from the previous three months, according to Miller. This year, the number of deals signed in the three months through Dec. 31 almost matched the third-quarter total, he said.
The surge in demand meant landlords could raise prices while eliminating incentives for would-be tenants, said Gary Malin, president of New York brokerage Citi Habitats, which also released a report on the rental market today. In 2011, 10 percent of deals brokered by Citi Habitats in 2011 included sweeteners such as a month’s free rent, down from 31 percent the year before.
Landlords also could afford to be choosier in accepting tenants, according to Caroline Bass, a broker with Citi Habitats.
“People were being incredibly strict for the winter season,” she said.
Kenneth Stojak, a recent transplant from South Carolina, sought Bass’s help in overcoming two things that made landlords hesitant: he owns a 115-pound dog and he doesn’t have a job.
Stojak, 37, who left his post as chief financial officer of the Salty Dog Cafe on Hilton Head Island, was flexible. He’d considered third-floor walk-ups, was willing to pay as much as $2,300 and didn’t insist on a particular neighborhood. He had money in the bank to pay a full year’s rent and a guarantor backing him up.
After two rejections and a search of almost two months, he found a renovated 400-square-foot (37-square-meter) studio on 95th Street between Park and Lexington avenues. He agreed to the $2,100 rent, which included a $100-a-month surcharge for his dog, a 6-year-old French mastiff named Sonoma Wesson Porterhouse.
“You can’t be too proud coming into this market,” Stojak said. “You have to eat some humble pie and like what you get.”
Manhattan’s apartment vacancy rate at the end of the year was 1.1 percent, down from 1.2 percent in the fourth quarter of 2010, according to Citi Habitats.
Nationwide, apartment vacancies dropped to a 10-year low of 5.2 percent in the fourth quarter, allowing for rent increases that are likely to continue this year, Reis Inc. said in a Jan. 5 report.
“Because the economy was so up and down, I think certain people put off their buy-side decisions temporarily until they figure out what’s going on,” Malin said. “Maybe you feel more comfortable dating your property rather than marrying it.”