A record number of desperate Manhattan and Brooklyn landlords are offering prospective tenants discounts, such as a rent-free month, to get them to sign on the dotted line amid a struggling market.
A report Thursday by Douglas Elliman Real Estate and appraisal firm Miller Samuel found that in Manhattan, the share of rentals with landlord concessions set a new record for the fourth consecutive month in January.
More:Groovy Baby! Mike Myers Quickly Finds Buyer for Tribeca Condo
At 30.9%, this was the first time that the percentage of apartments offering concessions crashed through the significant 30% mark, and it’s almost double the 16.4% rate recorded a year earlier. This trend was most prevalent in the two-bedroom market.
Much of this is to do with supply outpacing demand as a large number of high-end new rentals continue to hit the market. Indeed, listing inventory rose 13.9% to 6,959, while the number of new leases slipped 4.8% to 3,212.
Nevertheless, the landlords’ tactics seem to be working as the vacancy rate fell slightly from 2.82% to 2.35%, while the base rent was largely protected.
Median rents rose 0.6% year-over-year to $3,369 in January, while the net effective rent (including the impact of concessions) was virtually unchanged at $3,259. In the luxury sector, defined as the top 10%, median prices were down 5% at $7,595
"Landlords have been very aggressive in using concessions to protect base rents. As a result, it’s been successful in preventing the vacancy rate from expanding," Jonathan Miller, chief executive of Miller Samuel and author of the report, told Mansion Global.
"There’s still a lot more room to grow in terms of use of concessions so I think this trend is something that will continue well into the year," he added.
In Brooklyn, where many Manhattanites used to flee to avoid soaring rents, landlord concessions also hit a new record of 18.1%, more than triple the 5.4% from a year ago.
Like Manhattan, the issue is a flood of high-end rentals coming onto the market, with listing inventory increasing 24.9% to 2,459 in the year to January, while the average number of days a property spent on the market was almost a third higher at 68.
"What we’re seeing is a lot more inventory growth in Brooklyn throughout the year and that’s accelerating the use of concessions to protect base rents," Mr. Miller said.
Median rents in Brooklyn were 1.9% lower year-over-year at $2,750, the sixth drop in seven months. Including the impact of concessions, they were down 2.8% at $2,702.
More:This Is the Most Expensive Home Sold in NYC in 2016
A separate report Thursday by brokerage Citi Habitats found that 37% of Manhattan rental transactions it was involved in offered a free month’s rent and/or payment of the broker fee to entice new tenants in January–up slightly from 35% in December.