Rents in some Manhattan neighborhoods plummeted nearly 7 percent in November, according to a Manhattan rental market report released today by the Real Estate Group New York, while rental vacancies have skyrocketed in the months since Wall Street's meltdown.
Rental vacancies in November increased 7.5 percent from October, and 17 percent from September, the report shows.
The 17 percent is "a very large number," said Daniel Baum, COO of the Manhattan-based rental and sales real estate firm Real Estate Group. "It's a lot more inventory than we thought was out there."
He said the true figure may be even larger since many landlord don't list all the apartments they have available for rent, preferring to keep the true number of vacancies under wraps to help control asking rents and the pace of rentals.
To arrive at its figures, the Real Estate Group incorporates data from more than 10,000 listings culled from the company's proprietary database and other listings databases, such as On-Line Residential, also known as OLR.com.
While Manhattan rents are still jaw-droppingly high, they are dropping slightly across the board, as demand slackens along with the slowing economy. The average rent for a studio in a doorman building in Manhattan was $2,430, down from $2,471 in October, according to the report, one of the few that tracks changes in rents on a monthly basis. The average rent for a non-doorman studio was $2,005, down from $2,051 in the previous month. Doorman one-bedrooms rented for an average of $3,510, down from $3,550, while non-doorman one-bedrooms were $2,777, down from $2,789 in October. Finally, doorman two-bedrooms saw rents dip to $5,380 from $5,452, while non-doorman two-bedrooms fell to $3,844 from $3,876.
"Thirty-five hundred for a one-bedroom -- for someone who lost their job -- that's a tough pill to swallow," Baum said. "Even if you bring it down to $3,200, it's a tough pill to swallow. People are looking for ways to conserve money, and that's definitely affecting our rental market."
He added that an increasing number of available high-end rentals may be keeping average asking rents artificially high, since many renters are looking for cheaper apartments in the face of layoffs.
The steepest drops were in Gramercy Park, where the average asking rent for non-doorman studios fell 6.74 percent in November to $2,102, and 6.11 percent to $2,412 for doorman studios. Harlem was a close second, with non-doorman one-bedrooms dropping 6.43 percent in November, while rents in doorman one-bedrooms fell 5.31 percent. Non-doorman two-bedrooms in east Midtown fell 5.16 percent, and doorman two-bedrooms in west Midtown dropped 4.19 percent.
In the face of falling rents and a build-up of available apartments, landlords are beginning to panic, Baum said, adding that one landlord asked the Real Estate Group brokers to "just bring me bodies."
"People have more vacancies than they've had in more years than they can remember," Baum said. "It's got them concerned."
The problem goes back to this spring and summer, Baum said, when many landlords resisted lowering their rents despite decreased demand, as the economy showed the first signs of distress. Now, apartments that failed to rent are sitting on the market as we head into December, traditionally the slowest month of the year for real estate.
"Owners didn't pay enough attention to what was happening out there," Baum said. "We've had vacancies that have rolled over as demand is weakening. It's only compounded each month."
To cope with the situation, landlords are willing to do almost anything to rent their units, said Baum, from being more flexible with income requirements to paying brokers' fees to offering American Express gift cards to tenants. Baum said one landlord, the owner of roughly 50 New York City rental apartments, recently announced that pets would now be allowed, after years of prohibiting them. In another instance, a former client of the Real Estate Group's came to the firm for advice negotiating with his landlord for lower rent, and ultimately got his rent reduced to $7,000 a month, from $10,000 a month. "The landlord didn't want to take the risk of losing him as a tenant," Baum said.
All of these factors ultimately benefit renters, especially if they're currently looking for an apartment.
"December is going to be the month that landlords are willing to do whatever it takes to get you into an apartment," Baum said.