“Prices have reached an affordability limit and this is the response,” said Jonathan Miller, CEO of Miller Samuel.
The decline in Manhattan rents has important implications for the real estate market and overall inflation, as Manhattan is the largest rental market in the country. Tenants and economists have been predicting a decline in Manhattan rents for more than a year, but tight supply and strong demand pushed rents to record highs in the summer and remained stable in early fall.
Now brokers say demand is fading quickly.
“The decline was sudden,” said Keyan Sanai, Douglas Elliman’s lead leasing agent in New York. “You can feel it.”
Sanai said many landlords are quietly offering concessions like a month of free rent instead of lowering list prices. He recently had a one-bedroom listing in Midtown asking $4,700 a month. After negotiations, the tenant received concessions that reduced the effective rent to $3,900 per month.
According to Miller Samuel and Douglas Elliman, the number of homes offering concessions rose from 12% in October to 14% in November.
Sanai said the number of tenants looking for housing has also declined rapidly. In September, his inbox was full of tenant requests for a listing on a luxury building where apartments were going for $7,500 a month. A similar device came onto the market in October, “and no one came forward. The speed decreased rapidly.”
Of course, rents in Manhattan are still the highest in the country and still 11% higher than before the pandemic. The average rent in Manhattan is still $5,150 per month, although it is also down 2% compared to last year.
According to Miller Samuel and Douglas Elliman, inventories are also historically low at just below the normal level of 3%.
Still, agents say renters looking for apartments can expect a further drop in prices early next year. They say job losses in the financial and technology industries in Manhattan will limit the demand for young new employees in Manhattan. Falling mortgage rates will also result in the sales market becoming more attractive and more renters becoming buyers.
“I think it could be a dark winter for landlords, then it will probably be brighter in the spring,” Sanai said. “My advice to tenants is to take advantage of the offers.”