A man walks into a building with rental apartments available in New York.
Eduardo Munoz Alvarez | SEE press | Corbis News | Getty Images
Median rents in Manhattan hit a new high in January as a strong labor market and limited supply of apartments pushed prices up.
The median rental price rose 15% to $4,097 from the previous month – the highest on record in January, according to a report by Douglas Elliman and Miller Samuel. The average rent in Manhattan was $5,142, up 13% from January 2022.
Analysts and real estate experts had expected rents to start falling in January after record increases at the end of last year. But despite a shrinking economy and high-profile layoffs in finance and technology, rental demand in Manhattan remains strong.
“We don’t see rents dropping significantly,” said Jonathan Miller, CEO of Miller Samuel, a real estate appraisal and search firm. “They really move sideways.”
Analysts say the main driver of Manhattan’s rental market is a strong job market. While layoffs at big tech companies and Wall Street banks have grabbed headlines, the overall job market and wage growth remain strong in New York. As more and more workers return to the office, more employees may also return to town.
New leases in January jumped 8% from December and 9% from January 2022, suggesting that even if prices are high, tenants are still willing to pay them.
At the same time, the stock of available apartments, although increasing, remains low. The vacancy rate — or share of apartments available for rent — was 2.5% last month, below Manhattan’s more typical 3% rate, Miller said.
Joshua Young, executive vice president and general manager of sales and leasing at Brown Harris Stevens, said rental force is “a tale of two cities.”
He said there is strong demand for new, high-quality rentals to come to market in prime locations, creating a limited supply of high-end apartments. At the same time, more and more potential apartment buyers are choosing to rent while waiting for selling prices to drop.
“They sit and wait in rentals until prices come down,” he said. “They don’t want to be the ones buying and overpaying for a property that will be worth less in six months.”
Rental demand is particularly high in luxury rentals, as many potential luxury buyers choose to rent. Nearly one in five luxury rentals in January led to a bidding war, Miller said.
Analysts say rents aren’t expected to fall much, if at all, in the coming months unless the economy and labor market falter.
“I think 2023 will be as strong as 2022 when it comes to the rental market [goes]“, said Young.
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