The number of rental apartments in Manhattan nearly doubled in December

The number of rental apartments in Manhattan nearly doubled in December, signaling a possible turnaround in the city’s troubled real estate market.

According to a report by Douglas Elliman and Miller Samuel, the number of new leases signed in December has increased to 5,459, up 94% from last year. Profits were the largest increase in nearly a decade, and the third consecutive month of leasing gains year-on-year.

“It’s a small step in the right direction,” said Jonathan Miller, CEO of assessment and research firm Miller Samuel. “The statistics are still very weak. But at least it shows there is demand.”

The reason for the increase in rents is a continuous decrease in prices. Median net effective rents – or the rents people actually pay including discounts and incentives – fell 17% in December to $ 2,800 per month. Landlords offer an average of two months of free rent to lure tenants, with much more.

Realtors say three groups are driving demand. First, those who live in the city are using the price cuts to upgrade to larger or newer apartments. The second group includes the New Yorkers who left in the early days of the pandemic in March or April but are now returning. The third group includes couples and families who have sold their suburban properties for big price gains and are testing the waters in the city for the first time, given the better values.

Still, real estate agents and landlords say a full real estate recovery in Manhattan is likely a long way off. Even with the price declines and rising rental properties, Manhattan still has an almost record number of vacant apartments. In December there were 13,718 apartments on the list, more than two and a half times higher than last year. The 5.5% vacancy rate is nearly three times the historical average in Manhattan, according to Miller.

Many landlords and buildings are also keeping vacant apartments off the market, for fear of further oversupply. Miller said this “shadow inventory” or “managed inventory” means that the actual number of vacant, unlet apartments in Manhattan is likely to be over 20,000.

“I think we are in the preseason of recovery,” he said.

Renting gains are mainly driven by wealthier tenants, as high earners have largely escaped the economic impact of the pandemic, while lower-paid workers and service providers have endured the most pain. Leases for three-bedroom apartments, which rent an average of $ 8,000 a month, are up 171% in December from a year ago, the report said.

At the same time, effective rents for the smallest studio apartments fell by 19% and we saw much smaller gains in new leases.

The strength to the high end, driven in part by the rising stock market, is also emerging in the apartment sales market. While total apartment sales were down 21% in the fourth quarter, sales of apartments priced at more than $ 5 million were up 23% compared to the same quarter a year ago.

“It reflects the patterns in unemployment,” said Miller. “Lower wages have hit harder.”