Apartment buildings on the Upper East Side neighborhood of New York.
Victor J. Blue | Bloomberg | Getty Images
Manhattan rents hit their highest level ever for a December as the supply of apartments plummeted and landlords started demanding double-digit increases.
The average apartment rent in Manhattan hit $4,440 in December, while the more widely watched net effective median rent (median rent including all discounts) hit $3,392 — the highest level for December on record — according to a report from Douglas Elliman and Miller Samuel. The net effective median rent was up 21% over last year.
The surge marks a dramatic turnaround from a year ago, when there were more than 25,000 empty apartments for rent in Manhattan and even the most bullish brokers predicted a years-long recovery. Now, rents are often above pre-pandemic levels and renters are facing sticker shock on their rent increases for this year.
“What started as a trickle earlier last year has become like a geyser of demand,” said Janna Raskopf, a leading rental broker in Manhattan with Douglas Elliman. “I’ve been doing this for 14 years and it’s absolutely unprecedented.”
Raskopf and other brokers say demand is being driven largely by college graduates getting new jobs in Manhattan. Many poured back to the city last spring, when Mayor Bill de Blasio announced that the city would reopen July 1. Even though only about a third of office workers are back at their desks in Manhattan, the expectation of a return-to-office continues to bring in waves of people, brokers say.
New Yorkers who sold their apartments and moved their tax residency to Florida or another low-tax state are also renting to keep a part-time foothold in the city. Raskopf said even the very wealthy are sometimes choosing to rent rather than buy in Manhattan, waiting on the sidelines until they see how the city’s economic and cultural future develops post-pandemic.
All of the demand has created a sudden shortfall of supply. A year ago, the vacancy rate — normally around 2% for Manhattan — was 11%. Inventory had plunged by 81% in December 2021 compared with December 2020, according to the report.
Now, the vacancy rate is an unusually low 1.7%, with only 4,700 apartments available. Supply is so low that overall leasing activity fell by 40% in December compared with last year, due to a shortage of rental apartments.
Raskopf said she recently listed a two-bedroom for $12,000 a month. She immediately had 26 people tour the apartment and had a bidding war among the renters. She said it will likely rent for 15% above the asking price — like many apartments she’s listing lately.
“Forget about Covid discounts,” she said. “People know the listing price is usually just the starting point now, and they will have to bid higher to get it. I would say over half my listings in the fourth quarter went for the ask or higher.”
Existing tenants are also getting big rent hikes. Brokers say renters who got good deals in 2020 and early 2021 are starting to see their leases come due. Landlords see that they can increase rents by 20% to 30% or more based on the market — and are eager to make back their lower incomes or losses during the pandemic.
The biggest rent increases are downtown, with a 28% median rent hike, to $4,100. Rents for smaller studio and one-bedroom apartments surged the fastest, with studio rents up about 21%.
While many landlords are trying to work with existing tenants to limit the increases, some new renters are being quickly priced out of a market they were finally able to afford in 2020. The higher rents are dashing early hopes that Manhattan would become more affordable to a new generation of younger, first-time renters.
“The landlords are trying to make compromises,” she said. “But they had to keep paying their expenses and taxes during the pandemic and now they can make it back. Some tenants are just saying ‘I can’t afford a 20% increase’ and they’re leaving.”