|The Beekman Tower is one of Manhattan's newest rental buildings|
Maybe the only thing hotter than the weather in Manhattan the past few months has been the apartment rental market, where rents have continued to rise and vacancy rates have hit a new low, according to reports released Friday.
Manhattan's apartment vacancy rate was 0.72% in the second quarter, the lowest vacancy rate that Citi Habitats, the city's largest rental residential brokerage, has seen since it started tracking vacancies in 2002. The last time the rate was nearly this low was in second quarter of 2006, when it was 0.76%.
Average rents have seen large increases across the board over the past year, regardless of apartment size. Rental prices for studios and one-, two- and three-bedroom apartments increased 9.1%, 9.2%, 10.8% and 11.3%, respectively, according to Citi Habitats.
Similar trends could be found in a report by Prudential Douglas Elliman and Miller Samuel. The firms tracked 8,572 new rentals in the second quarter, an increase of 51.5% year-over-year, with the average apartment rental on the market for 33 days, compared with 40 last year.
“People are still coming to Manhattan looking for jobs,” said Gary Malin, president of Citi Habitats, citing what he described as a vast increase in the number of first-time leasers moving into the city.
With a much higher demand than seen in previous years, landlords are no longer scrambling to find new tenants—and they're lowering concessions as a result. For instance, 11% of Citi Habitat's rental transactions in June 2011 included a concession, such as a month's free rent or payment of brokerage fees, but it was 28% in June 2010.
“The catalyst is on the purchasing side of the market,” observed Jonathan Miller, CEO of independent real estate appraisal firm Miller Samuel, noting that the slow-moving economy and still-poor credit conditions are turning more home buyers into renters.
The Douglas Elliman report noted that the average rental concession was 1.2 months of free rent or its equivalent in the second quarter, down from two months in the year-ago period. While more than 60% of new rental deals had concessions in the second quarter of 2010, just 3.4% had them in 2011 over the same time period. As a result, the average rental price increased 3.4% for tenants after concessions this year, to $3,455 in the second quarter from $3,342 in the first quarter.
Despite the rising costs for space and the fact that there are fewer available apartments, pearls can await those who are willing to search deep.
“There's still a lot of opportunity in the marketplace,” Mr. Malin said, pointing to the Upper East Side as one area that still has a lot of value for the price. “It just depends on how creative you want to be.”