tamas's blog

Without surprise, market reports released early in May revealed that Manhattan’s apartment rental rates are staying above pre-recession levels as they continued to climb throughout the month of April. As Luxury Rentals Manhattan has continuously reported, New York's lack of available rental units is the primary cause of these skyrocketing rates.

Within recent years, converting offices into apartments has been a primary focus of Manhattan’s Financial District. Metro Loft Management has built a reputation on transforming business offices, as it presently owns nine modified buildings. The 66-story high-rise at 70 Pine Street is the latest to be added to their collection, and once it is finished, it will be the tallest residential building in New York and the Western hemisphere.

It’s an old story at this point, but if you’ve been following the Manhattan rental apartment market at all, you know the drill: vacancy is down, rents are up, new construction is scarce, and concessions are rare. Among the many explanations as to how we got here - and there are plenty - one of the most prominent is that Manhattan is a small island where space is limited, hence the lack of inventory. The reality is that this real estate platitude is a lazy way of analyzing our current market, one which obscures far more accurate explanations. For instance, the tight credit market for large new construction projects, government restrictions such as historic districts, and long-standing preconceived notions about certain Manhattan neighborhoods have a far greater influence on Manhattan’s rental apartment inventory than the size of the island.

The luxury rental market boom in Manhattan is just getting started. A dearth of new construction for Manhattan apartment buildings, severe lack of inventory, and high demand for luxury rentals in Manhattan virtually assures that prices will not only stay high or get higher on the top end of the market, they will likely rise for the lower end as well. Rents are soaring right now all around the borough, especially south of 59th Street. Desirable Manhattan neighborhoods like the West Village and Chelsea are setting records for high rents, but rents for formerly inexpensive apartments in Midtown West and the Financial District are also reaching new heights. Studios in Chelsea average $2,332 a month, while one-bedrooms in the West Village average $3,278 a month. Furthermore, newer buildings like 8 Spruce Street have raised the bar for luxury rentals in Manhattan. 8 Spruce in particular has changed the perception that renting is somehow less respectable than buying by offering luxury apartments that match the quality of condos. All over the city, landlords are responding by renovating their rental apartments to meet these new standards, so even though you may pay more for rent than you’d like to, you’ll get more in return.

We’ve already written extensively about scarcity in the rental inventory in Manhattan. A lack of available apartments will be one of the dominant themes of 2012, mostly due to economic uncertainty. The current economic climate has had the dual effect of preventing developers from constructing new buildings, and pushing people who would otherwise buy condos into the rental market. Yesterday the Wall Street Journal published figures that quantify the market’s scarcity. There will be roughly 2,230 apartments for rent in Manhattan that will go on the market this year, the lowest amount since 2005, when the figure was first counted. And the vacancy rate for all luxury rentals in Manhattan is 1.27%.