A man enters a building that houses rental apartments in New York City on August 19, 2020.
Eduardo MunozAlvarez | VIEW press | Corbis News | Getty Images
Tenants returned to Manhattan in November, lured by a record drop in rental prices, according to a new report.
New rentals increased 30% year over year in November, according to a report by Miller Samuel and Douglas Elliman. This was the strongest November in 12 years with more than 4,000 new leases.
The jump suggests the outflow of Manhattan residents, which began in March, may be turning as lower rates attract new renters and others returning to the city after months in suburban or country homes. The median effective net rent, or rental prices including concessions, fell 22% in November. In October, that was the biggest decline in its history.
The median rental price is now $ 2,743 with most landlords offering free rentals for more than two months.
"Lower prices created that trigger for inbound migration," said Jonathan Miller, Miller Samuel CEO. "This is one of the first signs that the market may be improving."
A Manhattan real estate rebound is likely to take years, given the huge supply of vacant apartments, condos, and cooperatives for sale, realtors say. There are still more than 15,000 unlet apartments in Manhattan, and the vacancy rate – typically around 2% – is still at a record 6%, the report said.
In addition, many buildings do not even offer all vacant rental apartments, fearing that they will put even more strain on the market. Miller said this "shadow inventory" of unlisted vacant homes could mean the actual vacancy rate in Manhattan could be closer to 18%.
“It's going to be an upward trend,” he said.
Many of the new tenants are asking for 18 to 24 month leases so they can keep today's low rates longer, the brokers said.
According to information from brokers and landlords, new tenants are led by three main groups. There are residents who use the price cuts to upgrade their apartments and get more space. There are Manhattaners who have lived in the suburbs since March when the city's coronavirus cases began to rise, but now want to return because they can't spend as much time outdoors – or miss the urban lifestyle.
"What clients tell me is that they tried the suburbs and missed the city," said Janna Raskopf, a leading rental agent at Douglas Elliman. "They say they miss going to a grocery store or coffee shop and not relying on a car."
Raskopf said she's also had a number of clients who lived outside of the city – on Long Island or other suburbs – and sold their homes in the suburbs because of rising property prices. Now they're renting in Manhattan to see if they like it and want to buy.
Realtors say another large group renting in Manhattan are millennials or younger renters who moved back with their parents for months but are now returning.
"They tell me I had to get out of there," said Raskopf. "They want their own space back."