Be prepared to see a huge increase in rents for 2012.
That’s the prediction from BOND New York, the largest independently owned residential brokerage, which culled its last four years of data in reviewing the market’s ups and downs. High rents are back, and the firm believes that rents will only climb higher.
Landlords will be looking for a 6 to 10 percent increase on current tenants and an 8 to 12 percent increase on new vacancies, according to a report released Thursday. That means overall pricing in Manhattan will likely increase by 8 to 10 percent on average for the coming year.
“We anticipate landlords’ confidence levels will increase with the high occupancy rates and high prices, which will cause vacancy pricing to increase as well,” the BOND report said.
After 2008’s “overheated” market, 2009 saw rental prices drop across the board before rising slightly in 2010. Prices then shot up in 2011.
Last year, studio and one-bedroom units saw a nearly 8 percent surge to $2,174 a month and $2,926 a month respectively. Rents for two-bedroom apartments shot up nearly 10 percent to $3,977 and three-bedroom units surged nearly 15 percent to $5,577.
“The average prices of the fourth quarter of 2011 finally exceeded the highs of 2008 in every category,” the BOND report states.
“It took our local economy four years to recover to the current level, which remains subject to employment and consumer confidence in one of the most expensive places to reside in the country,” the report found.
When the financial markets started to collapse at the end of 2008, Manhattan’s apartment market fell with it and landlords quickly began offering to pay broker fees or offering tenants rental incentives such as a free month’s rent or health club memberships, the report noted.
Things began to turn around in 2010 with lower prices, landlord incentives, improved job growth and “the perception that the last few ‘deals’ were drying up caused the inventory to disintegrate driving demand even higher,” the report said.
Consumer demand returned last year, making landlord concessions harder to come by. Prices are rising on rentals, according to real estate expert Jonathan Miller, who wrote Prudential Douglas Elliman’s fourth-quarter report. But the listing inventory was up 22 percent from 3,862 a year before and has been slowly expanding ever since.
Don’t expect a bigger inventory to deflate prices.
“Pressure is expected to continue on prices as long as credit conditions for mortgage lending remains tight,” Miller wrote.
Prudential Douglas Elliman found that median rents jumped 9.5 percent to $3,121 from the fourth quarter of 2010 to the fourth quarter of 2011.
Citi Habitats’ fourth quarter report found average rents rose 8.4 percent to $3,309.
The average rent was $4,993 a month in SoHo/TriBeCa, $4,135 a month in Chelsea and $4,069 in the West Village. Battery Park City/Wall Street had an average rent of $3,560 a month, the Upper West Side had an average rent of $3,560 and the Upper East Side’s was $3,302. The average rent in the East Village was $3,027 a month, $2,891 on the Lower East Side and $1,970 in Harlem, according to Citi Habitats.
“The rental market is certainly where the action is,” Stephen G. Kliegerman, president of Halstead Property Development Marketing, told DNAinfo, noting that bankers and lenders would rather see rental income for buildings than have properties sit empty.
“In the economy like this when people are skittish they turn to the rental market. When they’re bullish, they turn to condos,” he added.
To maintain such high rents, developers will be expected to have top-of-the-line amenities for their tenants, he predicted.