There is still a shortage of luxury rentals
Even if you can afford to live here, it’s probably too late.
Photo: Michael Lee/Getty Images
It’s a distant memory now, but at the start of the pandemic, it seemed likely — inevitable, even — that rents would plummet. And they did… for about six months. Last summer, the days of bargains were long gone and people were getting into bidding wars for rentals. The frenzy was so intense that even the glut of luxury rentals – the oversupply of apartment rentals that clogged the market for years before the pandemic – finally subsided.
In December, rents for luxury and doorman buildings in Manhattan exceeded pre-pandemic levels, according to the latest report by Douglas Elliman market report. High-end rents in Brooklyn have increased month-over-month and year-over-year. And concessions, taken for granted in the world of luxury rentals for five years, are disappearing (a quarter of Manhattan rentals offer them today, compared to 50% a year ago). “There was a reversal, a tremendous boom in the upper part of the market. This is the opposite of what it was before the pandemic,” said evaluator Jonathan Miller of Miller Samuel, who wrote the report.
Mark Martov, agent at Corcoran, said he’s never had such a hard time (or really had a hard time before now) finding rentals for high-end clients. He is currently working with a family looking for a three bedroom with outdoor space in Dumbo. They increased their budget from $9,000 to $15,000 a month, and there’s still nothing. “If you go to StreetEasy and type in ‘Dumbo,’ there’s literally a listing for a three-bed, and there’s nothing fancy about it,” Martov said. “I call management companies, other brokers, brokers who have made recent sales in the area.” (AT Magnolia, a luxury rental in Dumbo, the rental team says appointments have been sold out since the rental launched last week.) The family is not set on the neighborhood, he said – they are open to others in Brooklyn – and have adjusted their expectations. “At first they wanted a garden. But then they thought, “If there’s a balcony or a terrace, it’s fine.” Then it was, ‘Well, it’s okay if there’s no balcony as long as it’s a three bedroom.’ Lately, they’re saying a two-bedroom might do the trick.
Prior to 2020, the lower end of the rental market had the upper hand – which is not to say that cheaper rentals are languishing; these are also moving, but prices have not fully rebounded. Listing inventory for all apartments, luxury and non-luxury, is down (80% over the past year in Manhattan, 83% in Brooklyn). Stephanie Diamond, the founder of Registration project, said that while inventory on the site fell to normal levels in May 2021, demand, measured by the number of rental listing requests received, continued to climb. Right now, apartment rentals are getting twice as many inquiries as they did a year ago, and shared rentals are getting five times as many inquiries.
After the last recession a dozen years ago, developers rushed to build new buildings, many in areas that had undergone Bloomberg-era rezonings – Long Island City, the Williamsburg waterfront , Downtown Brooklyn – flooding the market with tens of thousands of new units per year. In 2016, as 11,514 new rental units came on the market in Manhattan and Brooklyn, the New York Times reported that the Brooklyn rental market was “saturated.” The following year, the Times declared “the year of the tenantthe number of new units in Manhattan and Brooklyn soared to 13,340. However, this was not an affordability build. Although the overall vacancy rate in both boroughs remained low, nearly all of the new apartments were luxury units — too expensive for the majority of New Yorkers. The owners therefore lowered the prices with concessions, a (supposedly temporary) trick to hide the fact that they were not renting at the asking price. Two months free on a two-year lease and waiver of brokerage fees was the norm, and many buildings offered more: four months free on a two-year lease, waived amenity fees, gift cards.
Even though many of these concessions have become more outlandish during the pandemic, the stock Exchange soared, the the rich got richerand this summer, the rich, who made up the vast majority of people who fled New York at the start of the pandemic, flooded the city. The rents in their neighborhoods reflected this: Soho, where 40% or more of residents have left in the early months of the pandemic, rents rose 57.7% year-on-year to a median of $6,002, according to a StreetEasy report. In the financial district, they increased by 38.7%; in the West Village, 36.5%. (Flatbush, by comparison, was up 11 percent.)
Is the rebound at least stabilizing? Things seem to be calming down. In the words of real estate experts, the numbers are “stabilizing” – returning to pre-pandemic levels, returning to normal, in all areas of the market. Suffice to say expensive. For everyone.