Oversupply of luxury rental apartments in Manhattan continued to put downward pressure on pricing last month.
As a result, both the median and average rents for $10,000-plus leases signed in February fell by double-digit percentage points compared to a year ago, according to data compiled for Mansion Global by Miller Samuel Inc. and Douglas Elliman as well as from their monthly rental report released Thursday.
There were 126 new leases transacted in February with a rent of $10,000 or more per month, up 26% from the same period last year. However, the average price of these so-called super-luxury rentals fell 22% from $20,108 to $15,659, while the segment’s median rent also declined 11% year-over-year to $12,925 per month.
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"This market is still oversaturated with new developments, mostly skewed toward the high-end market, coming onto the market," said Jonathan Miller, chief executive of Miller Samuel and author of the Douglas Elliman report.
The most expensive lease signed in February was for a townhouse on 94th Street on the Upper East Side. While the five-bedroom, six-bathroom home is offered for sale at $26.9 million, it found a renter for $75,000 a month, according to Mr. Miller and listing site StreetEasy.
In terms of the overall luxury rental market in Manhattan, defined as the top 10% most expensive leases—389 leases with a monthly rent of $6,395 or more—the average rent fell 5.8% year-over-year to $10,333. The median rent for that segment rose 6.4% to $8,495 per month, though, due to an uptick in the number of pricier leases.
| Manhattan Luxury Rental Market in February | ||||
| Price points | # of leases | Y-O-Y | Median rent | Y-O-Y |
| Top 1%, $15,000+ | 40 | -13% | $20,500 | -5.2% |
| Top 3%, $10,000+ | 126 | 26% | $12,925 | -11% |
| Top 10%, $6,395+ | 389 | 6.9% | $8,495 | 6.4% |
| Overall rental market | 3,881 | 6.8% | $3,300 | -1.5% |
| Source: Douglas Elliman & Miller Samuel | ||||
Landlord concessions remain prevalent
Faced with competition, landlords for luxury apartments continued to make concessions to entice potential renters. About 163, or 42%, of new luxury leases signed in February, came with sweeteners, such as a free month’s rent and/or payment of the broker’s fee.
In the overall rental market, the percentage of leases with concessions was even higher, at 48%, although for different reasons than luxury rentals, Mr. Miller said.
"Non-luxury landlords were offering concessions because they were over-aggressive in pricing, being inspired by luxury asking rents," Mr. Miller said.
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The median rent for all 3,881 Manhattan leases signed in February was 3,300, down 1.5% from the same month in 2017. Taking concessions into account, the net effective rent was $3,168, down 2.8% from February 2017.
A separate report by Citi Habitats, also released Thursday, had a similar narrative about Manhattan’s rental market. About 46% of rental transactions it brokered were sweetened with landlord concessions.
"Landlords are taking a proactive approach to temper resistance to current rents," said Gary Malin, president of Citi Habitats, in the report. "Through moderation in pricing and the continued use of concessions, they have been able to consistently reduce vacancy rates—while providing attractive opportunities for apartment seekers."
Manhattan’s vacancy rate stood at 1.74% in February, marking the third consecutive month of vacancy-rate declines, according to Citi Habitats.
The most expensive area for renters overall was SoHo/Tribeca, which had a median rent of $5,300 per month in February, the brokerage found.