Super-Luxury Rentals See Major Uptick in Activity in Manhattan

Activity in Manhattan’s high-end rental towers and equally luxurious investment units in condo developments is booming, according to a Douglas Elliman report released Thursday.

In fact, 88 leases signed in May had a monthly rent of $15,000 or more, almost double the number seen last May (45), and representing an all-time record since 2011, the year the national brokerage started tracking the data.

Compared with April, the number of super-luxury leases increased 69%.

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"This has everything to do with new developments entering the market," said Jonathan Miller, chief executive of real estate appraisal firm Miller Samuel and author of the report. "There are just so many high-end products on the market."

A search on New York-based property marketplace StreetEasy further backed up Mr. Miller’s observation. There are about 532 units currently available for rent for $15,000 and above in Manhattan. The highest ask is a full-floor apartment in The Pierre Hotel, renting for $500,000 a month.

The market share of this small niche segment also grew, accounting for 1.5% of all the new leases signed in May. By comparison, the share was 0.9% a year ago, according to Mr. Miller.  

Again, the growth didn’t necessarily reflect stronger demand, rather, it was more about surging supply in the top-tier rental market in Manhattan.

"One of the things that caught many rental builders by surprise is that they miscalculated the competition from the luxury condo market," he added.

According to his estimate, 25% of new luxury condo development sales have been to investment buyers, who generally put their apartments back into the rental market.

Meanwhile, the average rent in the luxury Manhattan rental market, defined as the top 10% of the overall market, reached $10,668 in May, a 8.2% increase year-over-year. The median luxury rent in the borough stood at $8,000, up 0.9% from a year ago.

There were 197 new $10,000-plus monthly rental transactions in May, rising 41% from a year ago. Compared to April’s 132, it was a 48.1% increase.

However, luxury rentals in Brooklyn and Queens saw some cooling signs. The average luxury rent in Queens fell 9.2% year-over-year to $4,505 while Brooklyn’s dipped 0.6% to $5,450.  

Skewed by more high-end luxury rentals, the overall Manhattan monthly average rent increased 4.4% year-over-year to $4,208 in May.

Landlords continued to offer concessions to renters, with a quarter of leases coming with some kind of sweeteners in May, according to the report. This strategy looked to be successful, as the vacancy rate dropped below 2% in May, for the first time in two years.

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Separately, a rental report by brokerage firm Citi Habitats also released Thursday showed that SoHo/Tribeca was the hottest neighborhood for renters, with a median rent of $5,925 in May. The next two coveted areas were Gramercy/Flatiron and Chelsea, with a median monthly rent of $4,400 and $4,000, respectively.

"We remain in a price-sensitive rental market where incentives remain in play," said Gary Malin, president of Citi Habitats.  "However, as is typical for the season, demand for apartments is increasing as we enter summer," he said.   

Out of all the rental transactions brokered by Citi Habitats in May, 22% offered concessions such as a free month’s rent and/or payment of the broker fee, a 17% increase over leases from a year ago.