In 2012 the Manhattan rental market reached new heights, as low inventory and high demand created a feeding frenzy. Now a new report prepared by Miller Samuel Real Estate Appraisers and released by Douglas Elliman suggests the Manhattan market may be turning a corner as things cool down.
“The big news is that the pace of rental increases is slowing down, that if we look at a year-over-year comparison and controlling for seasonality, rents are simply not rising at the frenetic pace that they were over the last year,” says Jonathan Miller of Miller Samuel, who prepared the report.
The report finds that while rents were rising approximately 7.5 percent each month year over year, in the last quarter rents were increasing only about 1 percent per month from the year before.
He says this suggests Manhattan is transitioning into a more stable or slowly growing market.
While rents might not be increasing as quickly, they are still settling at a pretty high level.
“A studio is renting at about $2,450 on average, one-bedrooms at about $3,200, a two-bedroom is about $5,000 and a three-bedroom at a little bit over $10,000 per month,” says Miller.
This average includes everything from walk-ups to super high-end luxury units.
Another sign that things could be easing is the increase in the number of days on market.
“A year ago it took an average of 37 days for all apartments in Manhattan that we tracked. Now it’s 20 days longer — almost three weeks longer. It’s 57 days and we’ve seen that for the last two months and that’s maybe the beginning of a trend as well,” Miller says.
Miller credits the purchase market with the slowdown, saying the record low interest rates are driving more people to buy.
Despite that, Miller says he does not see prices coming down any time soon. There is still a shortage of supply and there is not enough new development coming to market to ease the crunch. Increasing employment rates could also squeeze the rental market even more.
So even if things are stabilizing, when it comes to prices, this could be the new normal for quiet a while.