More Troubling Signs For NYC Real Estate As Rent Concessions Soar

Tyler Durden's picture

The October 2016 Douglas Elliman Real Estate Guide for Manhattan reveals some fairly startling hints about the "health" of NYC real estate.  For months we've been writing about the soaring capacity of luxury apartment buildings in New York City and it looks as though that capacity influx is starting to take a toll as the percentage of rental inventory offering landlord concessions soared to 23.9% in October, more than double the 10.4% recorded last October.

The market continues to be softest at the top.  Luxury median sales price declined 10.9% to $7,792 over the same period and the largest decline in more than 4 years.  The market share for landlord concessions more than doubled to 23.9% from the same period last year to the highest share in 6 years this metric has been tracked.  As a result, net effective median rent fell 1% to $3,322 from the same period last year.  Days on market, the number of days from the original list date to the lease date, expanded by 6 days to an average of 46 days.  Listing discount, the percentage from the original list price to the rental price, rose to 3.1% rom 2.3% in the same month a year ago.

The percent of rental inventory granting landlord concessions has surged in recent months as building owners attempt to fill new apartment capacity.  As Bloomberg points out, with several buildings still under construction, the surge in new high-end capacity shows no signs of abating at any point in the new future.

Lease-signing sweeteners, such as a month of free rent or payment of broker fees, were offered on 24 percent of new rental agreements in October, up from 10 percent a year earlier, according to a report Thursday by appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate. It was the biggest share for any month since the firms began tracking the data six years ago. Landlords also agreed to cut an average of 3.1 percent from their asking rents in order to reach a deal.

 

Property owners in Manhattan are working harder to lure tenants who now have the ability to bargain-shop amid a surge of high-end apartment construction that shows no signs of abating. The final months of the year are considered to be the slowest time for apartment leasing in New York City, adding to the urgency for landlords, said Jonathan Miller, president of Miller Samuel.

 

“Concessions are one way to keep the vacancy rate in check and keep the buildings as full as possible,” Miller said in an interview. “It’s a baseline metric we’re going to be dealing with for the next several years, at least.”

NYC Rents

 

Meanwhile, it's not just new capacity that's putting pressure on rental prices and concessions.  As the following chart highlights, new leases signed in recent months have also been falling with October new leases down 3.9% YoY and nearly 23% sequentially. 

NYC Rents

 

Rental days on the market also increased by 15% YoY to 46 days while listing discounts increased 80 bps to 3.1% of the original listing price.

NYC Rents

 

Finally, listing inventory in Manhattan is up nearly 23% YoY while Jonathan Miller, President of New York City appraiser Miller Samuel, warned "This is probably not a temporary blip."

“There must be great concern because of how much competition has been added to the market over the last couple of years,” Miller said. “This is probably not a temporary blip.”

 

For Manhattan apartments, the median rent rose 0.3 percent from a year earlier to $3,400 a month, Miller Samuel and Douglas Elliman said. But when factoring in the value of concessions, the median actually declined by 1 percent.

 

“Incentives remain the preferred alternative for owners to keep face rents high while creating a sense of value in the marketplace,” Gary Malin, president of brokerage Citi Habitats, said in a separate report on the rental market Thursday.

 

The fancier and more costly the apartment, the more landlords had to offer enticements. In Manhattan buildings with doormen, 31 percent of new leases last month came with incentives, Miller Samuel and Douglas Elliman said. In buildings without lobby attendants, sweeteners were given on 17 percent of new agreements.

NYC Rents

 

With trends like this, Jimmy McMillan may be able to retire soon.

Rent

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Leveraged Algorithm's picture

Is that Al Sharpton? Hero of the poor?

Urban Redneck's picture

Al Sharpton didn't endorse Donald Trump.

The Merovingian's picture

If USTs rise, the RE market is going to deflate, period. The question is how quickly.

B-Bond's picture

Going to go higher with helicopter money on the horizon.

Place your Bets!

Scrubbing Bubblez's picture

Didn't Fat Al say something about leaving the USA? Of course, his AIDS looking ass won't go. There's no one in Africa he can shake down without getting shot!

BabaLooey's picture

The irony is a billionaire is moving into public housing vacated by a whoop of gorillas.

847328_3527's picture

Ever since Giulianni left NYC it has been on the decline. Crime way up. Some areas look like Haiti like around Union Square Park.

What a cesspool.

Stanley Lord's picture

yup, I live hear and you are right. The other day at the 34th Street subway stop the smell of urine was overwhelming.

$99 Million apartments and shit in the gutters, something doesn't scan.

chosen's picture

Sounds like San Francisco.  I guess rich people like to smell poor people's piss and shit.

Mr. Universe's picture

The sheeple here just passed a 3.5 billion bond to keep BART "Safe and reliable" yet they won't be able to keep the smell of urine and feces out of the stairways and escalators.

NobodyNowhere's picture

Not just smell - the filth-laden particulates kicked into the air get vacuum-deposited into lungs, land on face; talk and they go into mouth. Particles by the thousands a minute as you walk past

erkme73's picture

Howie Mandell is that you?

brushhog's picture

You can literally see the dirt in the air over there.

Scrubbing Bubblez's picture

It does when a certain Satanically evil (((tribe))) is involved!

Allen_H's picture

That is the plan for them, they pick an area, make it exclusive, push out all the poor, but stay centralized, they need to prey off the poor, and the poor have to come in from the surrounding areas to work for their masters, in NY it is Manhattan, in London it is Hamstead, Regents Park, city of London(has the lowest people/km). Evil fucks, they should all hang, what makes them think they are better than the rest of us?

p.s. They are Luciferian, not Satanic. Those are two different religions. But Lfer like to use Satanism as a cover.

Urban Redneck's picture

But NYC was a FUN cesspool before Giulianni showed up and deported the local culture so big biz could build Disneyland on the Hudson

Cabreado's picture

Don't count on a new Presidency to fix greed.

DrZipp's picture

So a 750 sq ft studio is still only $6k a month, but u get 21 free days rent to move in. Big whoop.

the.ghost.of.22wmr's picture

The NAR cheerleaders will get right on this!

Bunga Bunga's picture
Vancouver slaps $10,000 a year tax on empty homes. Lie about it and it’s $10,000 a day

http://www.calgaryherald.com/vancouver+slaps+year+empty+homes+about/1237...

Clowns on Acid's picture

Its all about the 10yr (the mortgage rate reference). The Fed will not "save" El Donaldo like the saved the brown clown with QE, producing histrical low olevels for mortgage rates.

Rates will continue up, street protests will increase in Jan / Feb, real estate in NYC, Boston, LA, SF, Seattle..... all begin coming down. Trump will have a 2 year run of recession....then...ba ding ba damm...a real recovery.

'

CJgipper's picture

That's what I'm hoping for.  A realignment of prices to income instead of prices to debt availability.

francis scott falseflag's picture

 

Manhattan Real Estate

 

The bell they ring at the top

milking institute's picture

There's never been a better time to buy! call me,i also got a great bridge for sale,hurry,i have several morons lined up and eager to sign!

Scrubbing Bubblez's picture

Jump, you real estate (((bastards!)))

Long memory man's picture

Bubble bubble toil & trouble.

Infield_Fly's picture

The rent is too damn high.

 

LMFAO  -  just look at that fucking cartoon!!!

RaceToTheBottom's picture

That is Millionaire Cartoon to you, sir.

brushhog's picture

If NYC real estate takes a tumble, I'm going to owe ZH a HUUUUGE thank you. I had a small interest in a company that operated in NYC. The other members wanted to take out an enormous loan, bulldoze a small building and build some huge apartment complex. All members had to put money in to get it started, we had a couple of heavy hitters on board who would secure the loan. The numbers never added up to me, and being a ZH reader for a number of years I was very skeptical of the real estate bubble and taking on the level of debt ( they wanted us to put up our personal assets...homes, investments, savings, etc ).

I sold out my share and the other guys couldnt believe how stupid I was because 'real estate always goes up'. I dont know whats going to happen either way but I sleep better at night.