Market Dip Forces 'Deals' at Luxury Buildings
MANHATTAN — Winter is a quiet time for the rental market, but this cold and snowy February has been especially slow, prompting an uptick in landlords offering tempting incentives.
Apartment hunters, particularly in Manhattan’s pricey doorman buildings and new amenity-laden buildings in hot Brooklyn neighborhoods, are being offered a free month’s rent or are having their broker’s fee paid in an effort to tempt them to sign leases, real estate experts said.
Roughly 19 percent of the more than 6,000 Manhattan apartments on the market — mostly in big, luxury rentals — were offering owner-paid incentives, according to data RentHop.com, an apartment search site.
The incentives give a short-term boost to tenants, but they’re also helpful in the long term to building owners. They give landlords a quick way to fill vacancies during a lull while letting them keep rents at high levels, experts said.
“It tends to be the large high-rises that offer incentives because they tend to have more vacancies and more turnover,” RentHop’s co-founder Lee Lin said.
“You may find a place with no broker’s fee but you may be paying more in long run [because the rents are higher in these buildings].”
The Financial District had the most concessions, with 23 percent of rentals offering some sort of deal, Lin said. Midtown West saw one in five rentals with either a free month tacked on or the landlord offering to pay the fee — which at 15 percent, or nearly two months rent, is no small chunk of change.
Manhattan neighborhoods offering the fewest incentives — at less than 10 percent — included Chelsea and Greenwich Village, he added.
Some landlords will offer a 13-month lease with an extra month free, for example, to try and get an apartment on a “more normal cycle,” so it will come back on the market in what’s typically the busy spring season, Lee explained.
“You might take a 14-month lease, but come next year then you'll be looking with all the other people in May or June,” he said.
And for landlords who are “quietly behind the scenes offering to pay broker fees,” it’s not only easy for them to take these deals away once they see inventory turn around, it also incentivizes brokers to show apartments in these buildings, Lee noted.
House hunters feel like they’re getting a deal, and brokers still get their fee.
“It's kind of like the sale mentality to bring traffic to your store,” said CitiHabitats’ president Gary Malin, whose firm found that 13 percent of the leases signed in January had some sort of owner-paid incentive. It was the highest percentage in two years.
The incentives did little to reign in Manhattan rents.
The average apartment rented for $3,397 a month in January, which was $186 higher than the same time a year ago, a recent CitiHabitats report found.
Luxury rentals and those in new buildings, in particular, saw prices rise last month, according to a recent report from Douglas Elliman. The median price for high-end units jumped 5.3 percent to $8,000 a month, and new rentals saw a 16.6 percent increase to $4,475.
“For landlords, it’s better for them to keep their base rents higher,” Malin explained. “They’re using incentives during appropriate times of year. You want to speed up leasings and you don't want to sit on vacancies.”
Either way, renters shouldn’t expect the incentives to last. Once the springtime hits, with the usual migration of post-college grads looking for apartments, many predict the incentives will disappear.
“It seems to be slower than normal for February [so] there’s definitely opportunity for renters that weren’t out there two months ago,” said Mark Sperry of Urban Edge, a site that lists no fee rentals in the city.
“But no one is anticipating this will last more than a few months.”
Douglas Elliman broker Brian Meier said that the luxury rental market dipped because more house hunters decided to either enter the sales market and take advantage of low interest rates or find cheaper rents elsewhere.
So, landlords at some of the city’s top rentals have been paying broker fees for nearly four months.
But Meier predicted the incentives would only last another month or two.
“The market is already starting to come around,” he said.