Apartment building in the Upper East Side area of New York.
Victor J. Blue | Bloomberg | Getty pictures
Rental prices in Manhattan reached their highest level ever in December when the supply of apartments fell and landlords began to demand double-digit increases.
The average apartment rent in Manhattan reached $ 4440 in December, while the more popular net effective median rent (median rent including all discounts) reached $ 3392 ̵[ads1]1; the highest level for December ever – according to a report by Douglas Elliman and Miller Samuel. Net effective median rent increased by 21% compared to last year.
The increase marks a dramatic reversal from a year ago, when there were more than 25,000 empty apartments for rent in Manhattan, and even the most bullish brokers predicted a years-long improvement. Rental prices are now often above pre-pandemic levels, and tenants are facing sticker shocks as they increase rents this year.
“A geyser of demand”
“What started as a drip earlier last year has become like a geyser of demand,” said Janna Raskopf, a leading rental agent in Manhattan with Douglas Elliman. “I’ve been doing this for 14 years and it’s absolutely unique.”
Raskopf and other brokers say that demand is largely driven by college graduates who get new jobs in Manhattan. Many flocked back to the city last spring, when Mayor Bill de Blasio announced that the city would reopen on July 1. Although only about a third of office workers are back at their desks in Manhattan, the expectation of a return to the office continues. to bring in waves of people, say brokers.
New Yorkers who sold their apartments and moved their tax haven to Florida or another low-tax state also rent to stay part-time in the city. Raskopf said that even the very affluent sometimes choose to rent instead of buying in Manhattan, while waiting on the sidelines until they see how the city’s economic and cultural future develops after the pandemic.
All the demand has created a sudden shortage of supply. A year ago, the unemployment rate – normally around 2% for Manhattan – was 11%. The stock had fallen by 81% in December 2021 compared to December 2020, according to the report.
Unemployment is now unusually low at 1.7%, with only 4,700 apartments available. The offer is so low that total rental activity fell by 40% in December compared to last year, due to a lack of rental apartments.
Bid war, double-digit rent increases
Raskopf said she recently listed a two-bedroom for $ 12,000 a month. She immediately got 26 people to visit the apartment and had a bidding war among the tenants. She said it will probably rent for 15% above the asking price – like many apartments she has listed in the past.
“Forget Covid discounts,” she said. “People know that the listing price is usually just the starting point now, and they have to bid higher to get it. I would say that over half of my listings in the fourth quarter went for bids or higher.”
Existing tenants also receive large rent increases. Brokers say that tenants who got good deals in 2020 and early 2021, are starting to see the leases expire. Homeowners see that they can increase rental rates by 20% to 30% or more based on the market – and are eager to recoup lower incomes or losses during the pandemic.
The largest rent increases are downtown, with an average rent increase of 28%, to $ 4,100. Rental prices for smaller studio and studio apartments rose the fastest, with studio rents up around 21%.
While many landlords are trying to partner with existing tenants to limit the increases, some new tenants are quickly priced out of a market they could finally afford in 2020. The higher rental rates break early hopes that Manhattan will be cheaper for a new generation of younger, first-time tenants.
“The owners are trying to compromise,” she said. “But they had to keep paying their expenses and taxes during the pandemic, and now they can come back. Some tenants just say ‘I can not afford a 20% increase’ and they leave.”