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Manhattan Rents Get Cheaper for Rich People and Higher For Rest of Us

By Amy Zimmer | June 9, 2016 7:19am | Updated on June 10, 2016 5:47pm
 This two-bedroom penthouse at the Avalon Clinton, 515 West 52nd St., is listed for $7,241 a month by Douglas Elliman.
This two-bedroom penthouse at the Avalon Clinton, 515 West 52nd St., is listed for $7,241 a month by Douglas Elliman.
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Courtesy of Douglas Elliman

MANHATTAN — Manhattan’s rental market is growing increasingly polarized, with prices still rising at the highly competitive lower end of the market while coming down at the highest reaches.

Apartments in the top 40 percent of the market — those north of $3,700 a month — saw slight price declines compared to a year ago, according to a report released Thursday by Douglas Elliman that looks at May rental data.

Meanwhile, apartments in the bottom 60 percent of the market saw price growth.

“As you go up in price, the growth is less or negative,” said real estate expert Jonathan Miller, who authored the Elliman report. He said the lower-priced units continue to face “significant [upward] pressure” from the competition on price.

Manhattan’s bottom third of the market — considered the “entry” tier — for instance, where the median price was $2,360 a month, saw prices rise 2.6 percent from last year, the Elliman report found. The borough’s top 10 percent of the market — where the median price was $7,929 a month, dipped about 0.3 percent from the year before.

Manhattan has seen an abundance of high-end rentals pop up lately, both in new developments built as rentals and in the new developments built as condos where sellers have been renting out their properties as soon as the buildings open.

“We’ve reached this point,” Miller said, “where there are many tenants who are resisting [high prices for luxury units], and it’s expanding from just the top 10 percent of the market. I think it speaks to an affordability threshold.”

He added: “There’s a mismatch between what’s being built and what is needed.”

Landlords generally want a tenant to earn about 40 times the monthly rent. That would mean a renter seeking a unit in the top 40 percent of Manhattan’s inventory would need to earn about $148,000 a year.

The median household income for Manhattan is $71,656, according to the most recent Census data.

Because of the oversupply of high-end rentals, those landlords are offering concessions, like a month or even two months of free rent, in order to keep their “face” rent high.

Nearly 13 percent of the new leases signed in May offered concessions, the Elliman report noted.

In May, which is considered peak rental season, concessions typically drop. Last month saw nearly three times the concessions for the month of May since Miller began tracking this metric five years ago, he said.

The concessions, however, were almost exclusively offered where the market is softest — at the high end and in the new pricey developments now hitting the market, said Hal Gavzie, Elliman’s executive manager of leasing.

“We’re seeing customers looking for a lot of the incentives that are out there,” Gavzie said. “At the lower end of market, the studio and one-bedrooms, if priced well, we’re not seeing incentives.”

Clients have been looking at more apartments than usual, he noted, in search of elusive incentives at the lower end of the market.

“They feel that they have more leverage, but at end of the day, if priced right, an apartment will move quickly,” he said.

The median rental price for Manhattan in May was $3,400 a month, the Elliman report found. In Brooklyn, the median was $2,874 a month, and in the Northwest part of Queens the report covers, which includes Long Island City and Astoria, the median was $2,727 a month.