Manhattan apartment rentals nearly doubled in December

Manhattan apartment rentals nearly doubled in December, signaling a possible turnaround in the city’s tough housing market.

The number of new contracts signed in December jumped to 5,459, an increase of 94% compared to last year, according to a report by Douglas Elliman and Miller Samuel. The gains marked the biggest increase in almost a decade and the third consecutive month of year-on-year leasing gains.

“It’s a baby step in the right direction,” said Jonathan Miller, CEO of the evaluation and research firm Miller Samuel. “Metrics are still very weak. But at least it shows that there is demand.”

The reason for the increase in rents is the continuous fall in prices. The median net effective incomes – or the incomes that people actually pay, including discounts and incentives – fell 17% in December, to $ 2,800 a month. Homeowners are offering an average of two months of free rent to attract tenants, with many offering more.

Brokers say three groups are driving demand. First, those who live in the city are using price cuts to upgrade to larger or newer apartments. The second group includes New Yorkers who left in the early days of the pandemic in March or April, but are now returning. The third group includes couples and families who have sold their properties in the suburbs at great price gains and are testing the city’s waters for the first time, given the best values.

Still, brokers and homeowners say the full recovery of the Manhattan real estate market is still a long way off. Despite falling prices and rising rents, Manhattan still has an almost record number of empty apartments. There were 13,718 apartments listed in December, more than 2 ½ times last year’s total. The 5.5% vacancy rate is almost three times the historic Manhattan average, according to Miller.

Many homeowners and buildings are also keeping empty apartments off the market for fear of creating even more oversupply. Miller said that this “parallel inventory” or “managed inventory” means that the actual number of empty, unrented apartments in Manhattan is likely to be more than 20,000.

“I think we are in the pre-season for recovery,” he said.

Rental gains are being driven mainly by the wealthiest tenants, as those who earn the most have largely escaped the economic consequences of the pandemic, while lower-paid workers and service providers are the ones who suffer the most. Rents for three-bedroom apartments, which are rented for an average of $ 8,000 a month, increased 171% in December compared to the previous year, according to the report.

At the same time, effective rents for smaller apartments fell 19% and had much lower gains in new rents.

The strength in the high end segment, driven in part by the growing stock market, is also showing up in the apartment sales market. While overall apartment sales fell by 21% in the fourth quarter, sales of apartments with prices in excess of $ 5 million increased 23% compared to the same quarter a year ago.

“It reflects unemployment patterns,” said Miller. “Those who earn less have been hit harder.”