New York City’s Apartment Rents Are All Over the Map at Midyear

Average two-bedroom rents in Murray Hill (up 8.8 percent) and Greenwich Village (up 8.2 percent) saw similar monthly increases, while the ever-trendy SoHo’s two-bedrooms saw a significant decrease of about 7.3 percent — from $4,453 on average to $4,130.

“It is busier time of year, the rental market peaks somewhere in between Memorial Day to Labor Day,” Andrew Barrocas, CEO of MNS, told Commercial Observer. “There is a lot of new inventory starting to come on the market and I think with the announcement of 485x, that’ll definitely be beneficial for continuous growth.”

New York state lawmakers earlier this year enacted the 485x development incentive to replace the industry’s much-beloved and much-used 421a, which incentivized the construction of multifamily properties under certain circumstances.

That rental growth in the Financial District is the product of years of investment by the real estate industry to turn Lower Manhattan into a 24/7 community — and possibly hedge against distress in the office market — with new ground-up construction of apartment buildings as well as office-to-residential conversions.

But the real growth has come from new developments, Barrocas said.

“A lot of the original buildings were conversions that were generally made into larger units. So they didn’t get as much of a premium on the price per foot,” Barrocas said. “But as you build new construction, it’s built more efficiently.”

The Financial District is proving to be popular for a younger demographic, which is responsible for the majority of the increased rental activity in summer, and the same can be said for Murray Hill and Greenwich Village.

“There’s been a lot less new construction in the last year than there has been, and that’s not something that’ll be changing very soon, especially as land prices haven’t adjusted,” Barrocas said. “So you’ll continue to see these markets do really well from a rental standpoint.”

SoHo’s rent decrease is not something Barrocas would “be alarmed by,” however. Its limited supply means it’s more likely to fluctuate based on a handful of apartments hitting the market.

Carl Gambino, who leads Compass’ Gambino Group with Justin Montero, said space and perks will move an apartment faster now in New York than in recent eras.

“What I’m seeing a lot of in prime areas such as Tribeca, West Village is that elevator buildings with larger apartments are renting immediately, with many inquiries. I have seen a slowdown in studios and lack of amenity buildings,” Gambino said. “We rented an apartment this week in the West Village for almost $30,000 a month with multiple inquiries in [just a few] days.”

For Brown Harris Stevens’ Ari Harkov, a lot of New York City’s rental dynamics can be explained by Econ 101.

“The real estate market, like most economic markets, operates on supply and demand, and when you think about the supply side of the equation, SoHo is severely supply constrained,” Harkov told CO. “If you think about New York City from a post-COVID market perspective, or whatever we’re calling this current phase that we’re in, you have a couple factors that are really driving the demand for rental inventory in New York City. One, a high interest rate environment that is pulling prospective buyers into the rental market because they either can’t afford or don’t want to take on today’s mortgage rates. Two, you have a very perceptible and clear shift toward a young demographic of folks moving to and or extending their time in the city.”

There is the challenge, though, of a lack of public documentation, Harkov said. That means that many dynamics and data sets about rentals are hard to pin down. That’s especially true compared to apartment and building sales, which are declared through the city’s Automated City Register Information System, or ACRIS.

“When it comes to rentals, it’s like a black box where no one really knows [the exact details],” Harkov said. “Maybe the last asking rent was $5,000 but the tenant paid $4,800, or the landlord paid their broker’s fee and gave them the contribution towards their move or something.”

In Brooklyn, Boerum Hill had the highest average rent increase for two-bedrooms, with monthly rents rising 11.4 percent from $4,509 in May to $5,022 in June, while prices for studios in Bay Ridge decreased 7.9 percent from $1,781 to $1,641, according to MSN.

In Queens, average rents increased the most in Woodside and Maspeth in June, rising about 13 percent for a one-bedroom, from $2,434 to $2,750 — Barrocas said 7201 Queens Boulevard is a building doing particularly well — while in Jamaica studios decreased 7.5 percent from $2,328 to $2,152.

With May, June, July and August being the busy season for apartment rentals, as well as low inventory and high interest rates suppressing the sales market, renters who venture farther away from their target neighborhood are getting better deals on spaces that meet their needs, according to Gary Malin, chief operating officer of brokerage giant Corcoran.

“I think the prices are definitely at what I call a breaking point. And although the rental market is robust, there’s still a higher vacancy rate than you would normally see at this time of year,” Malin said. “It’s over 2 percent [in Manhattan and Brooklyn] and the reason for that has nothing to do with lack of demand or desire. It has everything to do with pricing.

“I’ve always said that in New York City there is an opportunity around every corner. And what I mean by that is, if you go out there and you’re willing to look, and you’re willing to go to maybe a different part of the city or different avenue than you originally would have anticipated, or look for a different type of building, you could always find something.”