“Prices have reached affordability and this is the reaction,” said Jonathan Miller, CEO of Miller Samuel.
The decline in Manhattan rents has important implications for the housing market and overall inflation, as Manhattan is the nation’s largest rental market. Renters and economists had been predicting a decline in Manhattan rents for more than a year, but tight supply and strong demand pushed rents to their highest in the summer, steadying in the early fall.
Now, brokers say the demand is slowing rapidly.
“The decline was sudden,” said Keyan Sanai, a top-rental broker at Douglas Elliman in New York. “You could feel it.”
Instead of lowering list prices, Sanai said, many landlords are quietly offering perks like a month’s free rent. He recently had a one-bedroom listing in Midtown asking $4,700 a month. After negotiations, the tenant won concessions that reduced the effective rent to $3,900 a month.
According to Miller Samuel and Douglas Elliman, the number of apartment offers increased from 12% in October to 14% in November.
The number of renters looking for apartments has also cooled quickly, Sanai said. In September, his inbox was flooded with rental requests for listings in a luxury building, where units went for $7,500 a month. In October, a similar unit came on the market “no one approached. The speed slowed down.”
Of course, Manhattan rents are still among the highest in the country and are still 11% higher than before the pandemic. Although down 2% from last year, the median rent in Manhattan is still $5,150.
According to Miller Samuel and Douglas Elliman, inventories are historically tight, below the normal 3% level.
Brokers say prices may continue to fall early next year for those still renting apartments. Job cuts in financial and technology industries in Manhattan will reduce demand for young new workers in Manhattan, they say. Falling mortgage rates can make the sales market more attractive, turning more renters into buyers.
“I think it’s going to be a dark winter for landowners, and then things will brighten up in the spring,” Sanai said. “My advice to tenants is to take advantage of the deals.”