NYC Rents No Longer 'Too Damn High' As Landlord Concessions Soar

Tyler Durden's picture

After years of gouging the precious, Ivy League snowflakes that flood Manhattan every summer with nothing but their $10 million inheritance checks, a dream and the Faconnable shirts on their back, New York City landlords, courtesy of the flood of new apartment supply coming online, are being forced to offer record-high rent concessions to attract tenants. 

Per the latest January 2017 rental report from Douglas Elliman, 31% of NYC apartments rented in January included some form of rent concession, a record high and nearly double the 16.4% from last January.  Meanwhile, average rental prices dropped 3.4% YoY and volumes declined nearly 5%.

Manhattan landlord concessions reached a new record as rental price trends remained softest at the top. The market share of landlord concessions rose  to 30.9%, nearly double the 16.4% share of a year ago.  Each month since July, median net effective rent declined.  The current month experienced a nominal decline of 0.1% to $3,259 on a year over year basis.  The market share of concessions for 2-bedroom apartments was the highest at 34.9%, followed by 1-bedrooms with 31.4%, 3 or more bedrooms with 29.3% and studios with 26.4%.


Consistent with rental price trends, the entry tier – the first 30% of rental activity, experienced a 1.9% rise in median face rent to $2,295 from the same period last year. Mid tier rents that comprise of the next 30%  of rentals, edged up 0.7% to $3,200 over the same period.  The upper tier or next 30% of the market was unchanged with a median rent of $4,400.  Luxury median rent accounting for the top 10% of the market fell 5% to $7,595.


The aggressive use of concessions helped push the vacancy rate down  to 2.35% from 2.82% over the same period.  Listing discount, the percentage from the original list price to the rental price, remained unchanged at 3% over the same period.

NYC Rents


As Bloomberg points out, rent concessions have been soaring for months now and are nearly triple what landlords had to offer over the summer to attract tenants.

“They know they have to,” Hal Gavzie, executive director of leasing for Douglas Elliman, said in an interview. “As landlords and owners, they would much rather not do it. But you have tenants and renters who are resisting the price increases, and this is now where things are.”


A swell of apartment construction in Manhattan has crowded the marketplace with choices and given tenants leverage to negotiate -- and walk away. That means landlords must work ever harder to keep their units from going vacant and appeal to consumers on the hunt for the best deal. Publicly traded landlord Equity Residential, which has 26 buildings in Manhattan, said in its earnings call last week that it’s resorted to offering gift cards as an additional perk at some of its properties to keep up with the competition.


“Tenants feel to some degree that the market is more to their favor,” said Gary Malin, president of brokerage Citi Habitats, which also released a report on Manhattan rentals Thursday. “They’ve kind of grown, over the last five or six months, to expect a concession in certain types of buildings, and without them, they won’t transact.”

NYC Rent


Meanwhile, lease volumes continue to crash despite the record-high rent concessions.

NYC Rents


But we're sure it's probably just the will all turnaround soon.

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evoila's picture

When investors are buying apartments at going-in yields of 3-4%, a 10% drop in your rental income equates to you basically losing 30% of your equity investment.

10% more, and you're going to probably be in violation of some loan covenants. We're already half way past the first 10%. Another 5% and the lenders will start getting very nervous and widen spreads. Add widening spreads to increasing rates, and you're going to start opening the door to cash calls from investors, and all the cash "sitting on the sidelines" is going to suddenly start being used to cover.

And voila; liquidity crunch a la 2007. Get ready. 

Spungo's picture

You would need to look into the details to see how that works. I'm big into REITs right now, so a common thing I see is having loan covenants and trust charters that limit the REIT's EBITDA to interest expense to a minimum of 1.5, and a debt service ratio above 1.3. Maximum debt load will be something insane like 70%, but very few operate with that much leverage.

Real estate is a remarkably safe business. The margins are ridiculously high. Even in the depression-ravaged oil province of Alberta, REITs operate at very safe ratios. 

fortune114's picture

It goes down every winter, duh.  Please also draw red arrow in the winters of '14 and '15 on your chart.

evoila's picture

Concessions are real. They are being handed out like candy in SF right now. It went from 1 month free, to now some places are offering 2 months free. That's 16.5% cut in NOI the first year. The problem is these people will jump in 12 months for the savings. It's concessions now, but it's going to start turning into real cuts on the actual rent soon. It always starts with free rent.

This winter is different. 

AgainstYourThought's picture

Certainly not the case in San Jose. I got nailed with yet another massive rent increase this year. I've started to look for other apartments, but everywhere in the South Bay has gone up so moving wouldn't save me any money. No concessions being offerred anywhere I've looked.

thecondor's picture

No concessions here in Tampa Bay either.  The whiter the area the higher the rent.  I have a nice 3br and its getting to the point I can rent a house for the same money.  Houses rent for 100% more than the mortgage here which is in turn 25% more expensive than an apartment.  I have found two houses that are the some as my rent, almost double the sqft, with a two car garage in upscale area.   Apartment rents here are like stocks on QE, up up and away.   

cowdiddly's picture

Its Ok NY Renters

if you find yourself out in the cold and needing a place to stay, you can rent a 1bdr suite with a park view at the Trump Tower for a mere $1275 a night and for only $99 more you can get a rollaway bed so the wino on the corner can warm up a bit. But, don't let him NEAR the mini-bar because that will be the Art of the Deal breaker indeed.

Got Rats on the West Side, Red Birds Uptown, What a Mess ,This Towns in Tatters.

Go Ahead, Bite the Big Apple...Don't Mind the Maggots.

JustPastPeacefield's picture

I always thought it was 'bedbugs' uptown. Red birds flying around don't seem to bad actually. Oh well, he was never known for his proper diction.

cowdiddly's picture

Your probably right. I was just shooting from the hip from memory as the song came to me as I was typing and seemed to fit. There's probably a boop or shadoobie or two I missed too. LOL

insanelysane's picture

Cognitive Dissonance: #52

Putin and Trump are going to start a thermo nuclear war.  We just love living in NYC it is a liberal progressive global city and would never be a target of terrorist or conventional warfare.

max_leering's picture


should there be a <sarc> tag on your comment?

rogue elements of the u.s. military may start nuclear war... neither DJT nor VVP wish that to happen... and nyc is no more susceptible to terror than any other city... and if it is attacked, or d.c., blame his rogueness Dick Cheney, the dual citizen hebes and PNAC, not isis or al queda

thought this article was about rent!?!

Spungo's picture

Average of $4,000 per month. Man that sucks. Unless you're going to be making 7 figures, there's really no reason for anyone to live in NYC. I know it's really scary to move, but people along the coast should think about moving to flyover states. 

max_leering's picture

agreed... my lowest rental is $725 for a 3 bed, 1 bath, with det. garage and fenced yard... good schools, older neighborhood

CrowTRobot's picture

No offense meant, but if you want to move to one of the sane parts of America, please leave your crazy politics in NYC.  I live in an area of NC that is heavily infested with people who have escaped NY and NJ.  Now my state has gone from solid red to purple... 

Even people who you think have seen the light..."too many taxes in NYC"..."too many rules", etc. come down here and then start advocating for more government shit to be paid for and more governement rules.  Keep that shit out of here.

Spungo's picture

What type of work do they do? If they do work for the government, the winning strategy is to increase government spending, get paid as much as possible, and leave the area so other people are stuck with the taxes.

orangegeek's picture

The masses have been leaving NYC as banking/trading/finance jobs disappear.


Rising NYC crime rate doesn't help either.



DIGrif's picture

Now THERE we need to build a wall....dont want all of those liberal leftist cesspool rats running around America.

Omen IV's picture

The inventory unoccupied is 7,000 which can easily go up by 10,000 units due to contruction finished in the next 18 months -  not a lot when there are millions of apartment but 10,000 is probably low for new finished units


chosen's picture

I hope all landlords go bankrupt and end up on the street so that I can piss on them as I walk by while laughing.