Winning in New York City’s Rental Market
Winning in New York City’s Rental Market
The dynamics of New York City’s rental market have changed. The New York Times, Wall Street Journal, Real Deal, and other major newspapers and journals are running articles about the shift in rents. Let’s take a deeper dive to see what is happening.
As this trend continued, more and more owners took notice and redeveloped more apartments specifically targeting the “higher end” of the rental market. With land prices rising, especially in Brooklyn and Queens, new rental developments were built specifically for this class of renter.
The result? An increased supply and more neighborhood options for NYC apartment dwellers.
Recently, as rental growth slowed, owners continued to push the “asking rent” for apartments higher and higher. Those increases were outpacing the demand and affordability for some of the rental population. To counteract this, owners began offering one month free, then two months free, and finally, paying the rental brokerage fee.
As a result, although the rents in New York City’s rental market appear high on the surface, determining the “real” rents inside of a building has become confusing to investors. They often ask, “What is the ‘net effective’ rent”?
Within 24 months, the new supply will be absorbed and high end rents will firm up again.
With all of this focus on the upper end of the rental market, also known as class “A,” few developers spent time creating and redeveloping more affordable housing. Although the mayor has an agenda to create more affordable housing, how it is done appears to be controversial.
Therefore, finding a way to create more middle income housing is an opportunity for investors as rents in the middle and lower end are experiencing moderate growth. Furthermore, there are no immediate prospects for developing an impactful supply in this category.
- Owners should offer no more than a one month concession
- And/or extend lease terms.
This leads to less confusion about the real operations of the building, and in the event of a sale or refinance, this places the owner in a powerful position defending the building’s gross income. Within 24 months, the new supply will be absorbed, and high end rents will firm up again.
Connect with us to stay in the loop on additional information & analysis!
Buy Peter's Book Today! Available on Amazon.
Catch up on our most recent posts here:
Anticipation and fear of significant changes in the lending market have been on people’s minds for the last 9 months. It’s been the big talk among anyone in NYC interested in real estate. But has anything really changed? In order to answer that question, I asked Andrew Dansker from our Capital Markets team to highlight current financing trends as they relate to the NYC market.
Lets hear from Andrew…
The selection of an asking price can cause a lot of confusion among sellers, their brokers and buyers. Using an appropriate asking price is a huge strategic advantage for sellers, and requires navigating topics like trust (are they truly representing me?), competency (do they know the market?) and capability (can they get it done?) with your broker. Therefore, it can often seem like the interests of the seller and broker are not aligned.
I can recall a time when Rose, an elderly widow, forced me to price her $30MM Brooklyn portfolio 25% over market, saying “Sometimes you got to ask a lot… just to get a little.” This was a strategic mistake. Why? It’s counter-intuitive…sometimes, the lower your asking price, the higher your selling price.
So far 2017 has been the opposite of what the experts’ predicted. When compared to one year ago, our teams’ inventory and transaction volume is substantially higher. Why? With the new government and rate increases wasn’t the market supposed to be slower? Lets explore…
The first major trend emerging is more product is coming to market. This is showing up as more potential sellers are asking for “opinions of values” and our listing inventory is up approximately 35%. To understand why, consider the mindset of the sellers. Five months ago, interest rates moved up for the first time in many years.