NYC Rents Negatively* Impacted By The Law Of Supply And Demand

NYC luxury rentals

Negatively of course if you are an apartment owner or developer and positively if you are a prospective tenant!

Economics 101: More supply in the face of steady or even declining demand, regardless of the product, will lead to lower prices!

Of course in the category of luxury Manhattan rental apartments, there are other variables that, despite any new supply, will come into play such as quality of the construction, amenities offered in the building, location (and view) and potentially even the ‘name’ of the developer.

But, all things being equal, the law of supply and demand is one economic theory that there are very few ways to circumvent.

So in an interesting turn of events to what has seemed to be an era of ever increasing Manhattan rents, at least on the very high-end, the tide now seems to be turning.

And as an observation from street level, one need only look to the sky at the bevy of construction cranes or to the holes in the ground where residential buildings will be rising to understand why supply is an issue now and into the future.

An article at Mansion Global titled ‘Luxury Rents in Manhattan Tumble‘ speaks to the issue…

Wealthy renters looking to sign a new lease in Manhattan may be able to save themselves a few pennies if a new report out today is anything to go by.

According to research by appraisal firm Miller Samuel, produced on behalf of Douglas Elliman Real Estate, average luxury monthly rents in Manhattan (defined as the top 10%) slipped 5.5% in the year to March, to $10,170.

This was the worst performance among all price points and was driven by an oversupply of super-luxury condo towers such as 432 Park Avenue — the world’s tallest residential building — which have flooded the market with thousands of high-end homes over the past year.

Bloomberg reported last month that many buyers of luxury condos are out-of-town investors looking to be landlords; at One Riverside Park, a new luxury-condo tower on the Upper West Side, 45% of the 161 units sold were put up for rent.

Across Manhattan’s rental market as a whole, average prices also slipped at an annual rate of 3.3%, to $3,989 last month, on the back of the growing imbalance between supply and demand. This was the first annual drop in two years.

The number of homes listed for rent in March, for example, rose 20.9% over the year, to 6,186, while the number of new leases signed slipped 1.6% over the same period to 3,387.

One indication that landlords are working hard to close deals? Around 14% had to offer deal sweeteners such as free gifts or discounts. In March 2015, just 5% of landlords had to follow similar measures.

In Brooklyn, luxury rental prices also continued to slip, falling 12.9% in the 12 months to March to $5,227. In contrast, overall average rental prices rose 0.2%, to $3,065.

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Michael Haltman is President of Hallmark Abstract Service in New York. He can be reached at mhaltman@hallmarkabstractllc.com.

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