Rent prices in Manhattan have been continuously rising since the end of 2010, according to a recent report by New York real estate consulting agency Nancy Packes Inc.
Their 2011 Midyear Rental Report was issued in collaboration with real estate website StreetEasy.com and leasing website On-Site.com, and explores the current rental market in-depth.
In terms of renting levels, several points stood out from the Report:
• Both the average and median prices increased by 5.4 percent for the studio to two-bedroom portion of the entire market
• There is a 9.8 percent increase in attended building rents, and an even higher increase in rents for unattended buildings, though rents for attended buildings are still higher than unattended ones
• Twenty-five percent of all transactions in 2010 included a price concession worth approximately 8 percent of the annual rent; transactions in 2011 no longer include the concession, which adds another 2 percent to effective rent increases
Next year, 3,584 units of rental developments are projected, which is low compared to the average of more than 3,200 units per year since 1997. With the price of land at an all-time high brought on by competition from condominium developers, the rental market strength in Manhattan will not be at its fullest in the near future.
Brooklyn and Queens have seen rapid development in the rental market. The price difference between Manhattan rentals and those in other boroughs had been 30 percent, but it has shrunk to a mere 10 percent. This phenomenon did not hinder the rent increase in Manhattan—so if Manhattan prices continue to remain high or increase, more and more supply will come from the outer boroughs.
Premiums for attended lobby buildings have decreased by 36 percent for studios, 21 percent for one-bedrooms, 18 percent for two-bedrooms, and 19 percent for three-bedrooms. This shows that renters on lower budgets are more willing to opt for unattended buildings. The premium for four bedrooms or larger rentals increased by 34 percent, indicating that for high-income consumers, high quality rentals are replacing the option of buying homes.
Despite the rise in rent prices in the past year, the Manhattan market will still be able to absorb such rent increases, according to analysis provided by the Chief Revenue Office of On-Site. On-Site calculated the rent/income ratio, which measures the percentage of income the average renter is willing to spend on housing. Compared to the period of rent increase from 2005–2008, the current ratio is currently on par with the five-year average.
In terms of renters’ employment trends, fewer and fewer people are taking jobs in the finance industry, which should weaken rental demand and lower rents.