Rents keep climbing in Manhattan, hitting a record high in May for the fourth consecutive month.
Median rent for an apartment in Manhattan climbed to $4,000 a month in May, surging 25% from a year ago, according to a monthly report from brokerage firm Douglas Elliman and Miller Samuel Real Estate Appraisers and Consultants.
And it doesn’t appear there will be relief anytime soon. The summer months of June through August tend to be the peak period for new lease signings and analysts anticipate rents to go up even further.
“This is a market that has been pressed to the ceiling. On top of that, the expectation is that new leasing will peak in August, which is expected to keep upper pressure on prices in the near term,” said Jonathan Miller, president and CEO of Miller Samuel. “I’m not sure how long this lasts after that, because at some point, for affordability, the math just doesn’t work.”
While the median rents for a studio and one-bedroom remained below $4,000, at $2,975 and $3,999 respectively, the median price for a two-bedroom was just shy of $5,000 and for a three-bedroom, it was $6,498 in May.
One factor pushing rents higher: landlords have pulled back on the discounts and concessions, like one or two months free rent, they were offering during the pandemic, said Miller.
The share of landlord concessions fell to 15.3% in May, the lowest since September 2016, according to the report.
Another added pressure: rising mortgage rates are adding hundreds of dollars to monthly mortgage payments and forcing many would-be buyers to remain in the rental market, Miller said.
“You have people who would be buyers being pushed into the rental market because they don’t qualify or can’t afford a purchase at this point,” said Miller.
That has helped push the number of renters signing new leases higher for several months, creating a more competitive environment where one out of five renters have been engaging in a bidding war and ultimately paying more than the listing price, said Miller.
Renters paid an average of 11% over the landlord’s asking price in May, an amount that has been going up in the few months since Miller has been tracking it.
Inventory of apartments was up from April, but down nearly 70% from a year ago. The vacancy rate in Manhattan remains under 2%, which Miller said is on the lower end of a normal range. All the excess inventory during the pandemic has been eaten up from its peak, when the vacancy rate reached as high as 11.79% in February 2021.
And prices have vaulted past pre-pandemic levels. The $4,000 median rent is 14.3% higher than May 2019.
“After rents fell 20% in 2020, they rebounded to parity in 2021 and now in 2022 they are going past pre-pandemic prices,” said Miller.