Manhattan’s luxury rental market gained steam in October, with leasing activity and median rents both increasing noticeably year-over-year, according to a Douglas Elliman report released Thursday.
During the last month, the top 10% of the rental market in Manhattan had a median rent of $8,400 per month, up 7.8% compared to October 2016. The number of luxury leases—468 apartments in total—represented a 15% increase over last year’s 407.
The entry threshold, or the minimum rent, Douglas Elliman used to describe the top 10% rental market, was $6,500, up 4% from the same period last year.
Thanks to an influx of newer, larger and pricier luxury product entering the market, this small segment of the rental market is relatively upbeat, said Jonathan Miller, chief executive of real estate appraisal firm Miller Samuel and author of the Douglas Elliman report.
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Most luxury apartments that rented were concentrated in the $6,500-to-$10,000 range—318 to be exact. There were 150 homes rented for $10,000 a month or more in October, up 20% from October 2016. The median rent for the so-called super-luxury rentals, though, dropped 10.2% year-over-year to $13,250.
The same pattern held true for leases with monthly rents of at least $15,000. While the number of those leases increased 1.7% year-over-year, the median rent fell 22.7% annually to $17,700, according to Mr. Miller.
"The new luxury products coming into the market are more commonly at the lower end of the top 10%, which drags down the luxury average rent overall," Mr. Miller said. In October, the average rent for all luxury leases fell 11.4% year-over-year to $10,084 per month.
The most expensive rental in October belonged to an apartment in Midtown high-rise One57. It was rented out for $42,500 a month on Oct. 19, Mr. Miller said.
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More high-end rentals in the pipeline
Landlords of luxury rental buildings will likely face increased competition in the upcoming months, according to Citi Habitats, which also published its monthly rental report Thursday.
"There is a lot of new luxury inventory currently for lease—and in the development pipeline," said Gary Malin, the brokerage’s president.
According to Mr. Malin, nearly 15,300 new market-rate apartments will come online in Manhattan as well as Brooklyn by the end of 2017, with an additional 15,000 new rental units set to launch next year.
"The vast majority of these new homes will be priced at the top end of the market," Mr. Malin said.
Considering the competition in the market, many landlords are offering generous move-in incentives while keeping their face rents afloat.
"In many cases, owners of luxury rental properties will pay brokerage fees and provide a month or more of free rent to new tenants," Mr. Malin said, adding that other creative gifts offered to entice would-be residents include gift cards, iPads, complimentary gym memberships and even trips to the Hamptons.
Overall market saw record-high vacancy rate
In terms of the overall Manhattan rental market, the median rent remained unchanged year-over-year at $3,400 a month, according to the Douglas Elliman report.
The number of new leases signed in Manhattan tallied up to 4,582 in October, increasing 13.2% from the same period last year. Meanwhile, listing inventory grew 2.7% year-over-year to 7,322.
The vacancy rate for all Manhattan rentals was 2.47% in October. Although it was lower than September’s 2.63% rate, it was the highest vacancy rate for the month of October in 11 years, according to Mr. Miller, which might explain why rents didn’t rise.