The median apartment rental price in Manhattan may still be well over $4,000 a month, but there are signs that New York’s rents may have finally reached their peak.
The median Manhattan rent in July fell by $100, or 2.3%, to $4,300 from a year earlier, according to brokerage firm Douglas Elliman’s monthly leasing report compiled by appraisal firm Miller Samuel. In Brooklyn, the median rent dropped to $3,600, while in Northwest Queens, which includes residential neighborhoods such as Long Island City, the year-over-year median rent dropped 5.2% to $3,450.
Excluding free rent and other tenant concessions, the so-called net effective rent also fell across the three boroughs in July, the study found.
“Rents have peaked,” Jonathan Miller, president and chief executive of Miller Samuel, told CoStar News in an email.
One signal that indicated a ceiling for rents is the fact that the average size of a rental across the three markets has declined, according to Miller. In Manhattan, for instance, the average square feet rented in July slid 9.5% to 945 square feet from a year earlier, the 11th-straight monthly drop, Miller Samuel found. The average size shrank 7.3% to 969 square feet in Brooklyn and plunged 14.5% to 811 square feet in Northwest Queens.
Spaces have returned “to more normal sizes” post-pandemic after renters sought larger spaces in recent years, Miller said, adding that tenants seeking to lower their rent also played a part in the reduction of space rented.
Renters Look at Buying
Meanwhile, with the expectations that the Federal Reserve will likely begin to cut interest rates this year, thereby lowering mortgage rates, Miller said more renters are returning to the homebuyers’ market after the reverse pattern previously sent would-be buyers into the rental market and further drove up rents.
The apartment supply also has increased. Listing inventory in Manhattan last month jumped 44% to 10,634 units from a year earlier, the third-highest level for the month of July. Manhattan’s vacancy rate ticked up to 2.87% from 2.63% a year earlier.
To be sure, while rents may have finally reached their peak, don’t expect rents to see any sharp drop any time soon.
“It’s still a landlords’ market,” Miller told CoStar, adding that one in five renters still paid above asking price.
In Manhattan, the listing discount was the second lowest on record, representing an average premium above the listing price, according to the report.
“The New York apartment market continues to be defined by many renters competing for a limited number of units,” according to a CoStar analysis. “New York City's diverse economy and its ability to add 54,000 jobs over the past year, along with some of the most expensive housing prices in the U.S., have recently boosted renter demand.”