Apartment rents in Manhattan continued their rise in the first quarter, according to two market reports released Thursday. One of them says rents hit a new record as of March.
Median net effective rent, which factors in common concessions such as one rent-free month, rose 9.1% to $3,064 during the first quarter, compared to the same period a year earlier, according to a report by Prudential Douglas Elliman and Miller Samuel Inc. Meanwhile, average net effective rent rose 8% to $3,608 in the quarter. In both cases the numbers were pulled higher in part by landlords’ increasing reluctance to offer deals to fill their buildings. During the first quarter, 12% of residential brokerage Citi Habitat’s deals included an owner-paid concession, compared to 17% the same time in 2011.
“The rental market is robust,” said Jonathan Miller, CEO of Miller Samuel. “There is little use of concessions by landlords and prices are trending higher.”
In fact, according to a separate report by Citi Habitats, in March, average rent in Manhattan not including concessions reached an all-time record of $3,418 a month—the highest level since the brokerage firm began tracking the statistic in January 2002. That surpassed the previous record set in May 2007 by $24. In the first quarter, the unadjusted face rent per square foot rose 7.1% to $52.57, its highest level since the third quarter of 2008, just as the credit crunch began, according to the Elliman/Miller report.
“The market is saturated with demand,” said Gary Malin, president of Citi Habitats, whose report is based on closed deals by the firm. He said he had not expected new records to be set until the traditionally busy spring and summer months. “There are a lot of people out there looking for apartments.”
In another sign of that strength, the number of new leases signed in the first quarter jumped 14.3% to 7,621 compared to the same period a year earlier, according to Elliman/Miller.
Messrs. Malin and Miller both warned that the feverish pace of rental activity and prices reflects not so much a thriving local economy, as it does a difficult lending environment. Both men pointed out that many people are still finding it hard to qualify for a mortgage to buy a home, so some individuals have no choice but to rent.
“People end up staying in the rental market longer than anticipated,” said Mr. Malin.
But as rents continue to rise and with mortgage rates close to all-time lows, the case for renting over buying is slowly beginning to weaken, agreed Messrs Malin and Miller. Renters are already starting to make a shift and jump into homeownership, there was an uptick in sales of entry-level apartments, studios and one-bedrooms, during the first three months of the year.
“With rents rising and loan rates remaining at a low, people are starting to look at the numbers again,” said Mr. Miller.