By DAWN WOTAPKA of the Wall Street Journal
The frenzy for Manhattan rentals is making a comeback, a sign of a rebound in the nation’s largest and most complex leasing market.
As the number of available units has fallen, New Yorkers hunting for apartments are finding they must return to competitive, aggressive ways to snag them.
Alexis Spadaro, for example, saw a two-bedroom unit on Morton Street in the West Village twice last week. She decided over the weekend to go for it. But the $7,500-a-month apartment was already taken.
You wouldn’t know that there was a recession if you were trying to get an apartment, said the actress planning to relocate from Los Angeles. If I see something and I like it, I have to take it.
As the market remained paralyzed in the aftermath of the financial crisis last year, the Morton Street apartment might have languished empty, forcing the owner to cut the monthly price or throw in a free month or two of rent. But the Manhattan market, where professionals often rent for years because of high purchase prices, is in transition.
The rent reductions are pretty much over. It’s bottomed, said Hessam Nadji, managing director of Marcus & Millichap, a real-state-investment brokerage firm. The worst is over and we’re starting to firm up, the stage is set for rent growth of 4% to 6% in 2011.
Rents, which plunged following the September 2008 collapse of Lehman Brothers, are stabilizing, aided by increased optimism about the national economy and new jobs. Across Manhattan in March, the average rent for a one-bedroom was $2,341, while two bedrooms came in at $3,289, according to Citi Habitats. That’s down 4.2% and 7.4%, respectively, from a year earlier, but up a hair from $2,335 and $3,283 in February.
The vacancy rate in Manhattan, where most of the housing stock is rentals, is already declining. It came in at 1.38% in March, below February’s 1.54% and down from 2.46% a year ago, according Citi Habitats. The national rate is 8%.
Mr. Nadji said the tri-state region is also seeing some firming, though not as much as Manhattan, given its desirability.
Another sign of healing: Negotiating for better lease terms is no longer a given. After two years in the driver’s seat, renters at all price points are seeing their control weaken. More landlords are sticking with their asking rents and offering fewer freebies, a shift that coincides with the arrival of the peak season.
Now it’s sort of take it or leave it, said Robin Schneiderman, senior vice president with Citi Habitats. People are taking things occupied and even renting before the renovations are done. You didn’t really see that.
While the housing boom’s frenzied pace hasn’t yet returned, it’s significantly better in terms of activity than it was six months ago, said Jonathan Miller, chief executive of appraisal firm Miller Samuel Inc. It’s a sign of improvement.
Fewer landlords now are paying broker fees, typically a month’s rent, something they resorted to in the down market. No landlord has offered to pay it for Ms. Spadaro, who has seen more than 50 apartments in the last year. Her broker, Mr. Schneiderman, said about 30% of owners are covering his fee, down from 75% last year.
Jamie LeFrak, whose family-run company owns about 2,500 rental units in Manhattan, said he’s paying the fee on some units. He’ll continue until the enthusiasm of the market resumes at full strength.
He will have to wait a bit: Manhattan’s rents remain more than 10% below the 2007 peak, and there’s not always as much competition as for the apartment that Ms. Spadaro lost. Meanwhile, the financial capital’s woes persist. Unemployment remains elevated and, with the city’s financial position dire, government layoffs loom.
Cuts in a lot of services and municipal and state jobs are coming, said Haendel St. Juste, a real-estate investment trust analyst with Keefe, Bruyette & Woods Inc. It’s just a question of how much.
Still, some job creation, a main driver of apartment demand, is expected.
No related posts found