Manhattan rents fell for the first time in over two years, as the supply of empty apartments grew and renters held out for price cuts, according to a report released Thursday.
The median rent in Manhattan fell 2% in November, to $4,000 from $4,095, according to a report from Douglas Elliman and Miller Samuel. The drop, while slight, marks the first year-over-year decline in median prices in 27 months, according to the report.
“Prices hit an affordability threshold and this is the reaction,” said Jonathan Miller, CEO of Miller Samuel.
The decline in Manhattan rents has important implications for the housing market and overall inflation, since Manhattan is the nation’s largest rental market. Renters and economists have been predicting a decline in Manhattan rents for over a year, but tight supply and strong demand pushed rents to record highs over the summer, holding steady in the early fall.
Now, brokers say demand is fading fast.
“The decline has been sudden,” said Keyan Sanai, the top rental broker for Douglas Elliman in New York. “You can feel it.”
Sanai said many landlords are quietly offering concessions, like a month of free rent, rather than cut listing prices. He had a recent one bedroom listing in midtown that was asking $4,700 a month. After negotiating, the renter won concessions that brought the effective rent down to $3,900 a month.
The number of apartments offering concessions increased to 14% in November from 12% in October, according to Miller Samuel and Douglas Elliman.
Sanai said the number of renters looking for apartments has also cooled quickly. In September, his inbox was filled with renter requests for a listing in a luxury building where units went for $7,500 a month. In October, a similar unit came on the market “and nobody was reaching out. The velocity declined rapidly.”
Of course, Manhattan rents are still the highest in the country and are still 11% higher than before the pandemic. The average rent in Manhattan is still $5,150 a month, despite also falling 2% over last year.
Inventory also remains historically tight, just under the normal 3% level, according to Miller Samuel and Douglas Elliman.
Yet brokers say renters looking for apartments may see prices continue to fall into early next year. They say job cuts in the financial and tech industries in Manhattan will limit demand from young new employees in Manhattan. Falling mortgage rates will also start to make the sales market more attractive, turning more renters into buyers.
“For landlords I think it could be a dark winter, then things will probably get brighter in the Spring,” Sanai said. “My advice to renters is to take advantage of the deals.”