A recent study came out that drew headlines declaring the price gap between luxury and non-luxury rentals becoming ever narrower in New York City, as median luxury rental prices have fallen sharply.
But according to some brokers, it’s just representative of a seasonal trend, and by summertime, those numbers will look a lot different.
Renthop, a rental listings site, recently released a report on rental trends in NYC that compares luxury and non-luxury rentals. The study defines luxury as buildings that have a doorman and/or a fitness center and are generally high-rise buildings, while non-luxury is everything else.
According to the report, asking rents for luxury units have dropped across the board, while on the non-luxury side, fluctuations in asking prices indicate that renters are leaving Lower Manhattan and mid-Manhattan, in addition to the some of the most expensive parts of Brooklyn.
Rents for luxury one bedroom apartments fell in 24 neighborhoods across the city, while just 11 neighborhoods posted increases in luxury rents.
The West Village, where the median asking rent for a luxury one-bedroom is now $5,200, posted the only large increase, with a 7.83 percent gain since end of year 2015. Boerum Hill, DUMBO, and Downtown Brooklyn posted minor increases, enough to offset drops in other parts of Brooklyn and keep the borough’s total median price the same as last year: $3,150 for a luxury one-bedroom.
East Harlem had the biggest luxury pop, with median asking rent soaring 21.5 percent to $2,351.50 for a one-bedroom apartment. Landlords seem to be betting on the 2nd Ave subway line and people’s willingness to bypass the Upper East Side in search of larger apartments and cheaper rents.
Steven Clair, an agent with Level Group, said the seasonal nature of real estate is a factor to remember when looking at the numbers. Winter is a notoriously slow time for rentals, since most people tend to move in the summer months when college semesters end for the year.
While there may still be a surplus of supply, Clair said the demand for units in the summer will widen the price gap between luxury and non-luxury rental prices.
City Connections president David Schlamm, who founded his brokerage firm in 1988 and has seen many real estate cycles over the years, said brokers often have a “short-term memory.”
“Every time we come into the winter season we think the world is ending, but it’s not,” said Schlamm.
However, he admitted that the amount of concessions landlords are offering is unprecedented.
“Now you get two, three months free sometimes, and paid brokers fees, I’ve never seen so many incentives, even on non-luxury properties,” he said.
Schlamm said pricing may have gotten a little out of control in the past five years, with some landlords getting “caught up in the craziness” of how well the market has done since 2012.
“No one predicted such a headwind,” said Schlamm. “I call it that because I don’t see a huge reason for concern. It’s almost natural in my mind.”
“It’s a renter’s market compared to how it’s been traditionally and the last three years bull run, but it’s still very expensive,” said Schlamm. “It’s easier to get an apartment now. You might get a free month’s rent or get away with not paying a broker’s fee. But it’s still not a bargain.”
Citi Habitats broker Rory Bolger has been shocked at some of the landlord concessions he’s seen recently. At one Manhattan building, a landlord was offering four months free as well as paying a 15 percent broker’s fee.
“I mean, wow!” said Bolger. He said the oversupply of luxury rentals will only get worse, with thousands of units coming online in the next two years.
“It’s only going to continue being a renter’s market,” he said. Bolger attributes this in part to the building boom that NYC experienced after the market bounced back from the recession.
Bolger also pointed out the major market presence that Brooklyn and Queens now have in the residential market, as both have gotten an influx of luxury rentals in the past few years. With neighborhoods in the outer boroughs becoming more and more popular, Bolger has seen a competing culture between devout Brooklynites and staunch Manhattanites start to take shape.
“There’s this whole culture now of ‘Oh, you live on the island?’ from people who only want to live in Brooklyn, while there’s the people won’t live anywhere other than Manhattan,” said Bolger.
