NYC Apartment Rents Fell in November, Vacancies Rose

Bloomberg.com December 04, 2008
NYC Apartment Rents Fell in November, Vacancies Rose
Sharon L. Lynch

Manhattan apartment rents fell for a fourth consecutive month in November and vacancy rates reached 2 percent for the first time in almost two years as Wall Street’s financial turmoil took a toll on the housing market.

Rents dropped 2.2 percent to 4.9 percent across all sizes of apartments, with the biggest drop in the smallest flats. Studios rented for an average of $1,808, down from $1,901 in October, New York-based real estate broker Citi Habitats said today in a report.

Rents are declining as New York City is forecast to lose as many as 165,000 jobs, including 35,000 in the financial industry, as the impact of the credit crisis spreads throughout the economy. Wall Street firms including Merrill Lynch & Co. have produced mortgage-related losses and writedowns of more than $900 billion and are cutting staff as the economy weakens.

“There’s a lot of volatility out there. A lot of people are worried about their personal circumstances,” Citi Habitats President Gary Malin said in an interview. “Everyone is definitively conscious about price.”

SoHo Most Expensive

The city’s most expensive neighborhood remained the Soho/TriBeCa area, with studios renting for an average of $2,395, one bedrooms for $3,637, two bedrooms going for $5,300 and three bedrooms for $7,045.

A three bedroom in Soho/TriBeCa costs almost 20 percent more to rent than on the Upper West Side, the second most expensive neighborhood for that size apartment.

Excluding areas north of 96th Street, the cost of a studio apartment fell the most in West Midtown, with the average declining 10.6 percent to $1,832. One bedrooms dropped the most in Midtown East, where they fell 7.5 percent to $2,621.

Murray Hill had the biggest drop in two-bedroom apartment rents, falling 10.4 percent to $3,225.

The biggest drop in three-bedroom apartments was in the Wall Street/Battery Park City neighborhood, where the average cost dropped 6.1 percent to $5,304.

The least expensive neighborhood south of 96th Street for studio apartments, two- and three-bedroom apartments was the Lower East Side. Studio rents there fell 1 percent to $1,600 a month, two bedrooms declined 3.2 percent to an average of $2,917 and three-bedrooms were little changed at $4,081.

For one-bedroom units south of 96th Street, the least expensive area was the Upper East Side, where prices fell 2.6 percent to $2,228.

More Discounts

Rising vacancies are also prompting some landlords to offer incentives such as a free month’s rent, Malin said.

“If I’m a tenant, I’m certainly going to have more options of apartments to look at,” Malin said. “They are also going to have more options when it comes to pricing.”

Rents are falling in Manhattan as apartment sales also decline and the inventory of unsold properties rises.

Sales fell for the third consecutive quarter and inventory rose by a third even in the three months ended Sept. 30 even as prices continued to extend a five-year streak of gains, New York-based real estate appraiser Miller Samuel Inc. and broker Prudential Douglas Elliman Real Estate said in a report on Oct. 3.

Transactions dropped 24 percent to 2,654 from a year earlier and the number of apartments on the market increased to 7,003. The median price of a condominium and co-op jumped 7.4 percent to $928,263, the second highest on record.

The third-quarter Manhattan property market results were the first to capture sales since Bear Stearns & Co. was forced to sell itself to rival JPMorgan Chase & Co. in March after customers and lenders fled on speculation the company was short of cash.

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