Average rents are up slightly in every single category. This is crazy to me: how can vacancies have risen as prices also rise? What about supply and demand? Some neighborhoods have seen quite a drop-off in prices, the LES and UES both saw fairly steep declines in the studio category but prices rose for one bedroom apartments, and overall studios were a weak category. Perhaps people are moving in with roommates rather than living alone? Soho and TriBeCa are now the most expensive neighborhoods, with the highest prices in all categories and the lowest vacancy rate. In contrast to the West Village, which seems to be declining in value somewhat.
A possible explanation for these price increases could be the impact that landlord incentives are having on the market. Many prospective tenants are going no fee and wind up paying a higher rent rather than a broker’s fee upfront. With the no fee option, rent for a specific apartment may be slightly higher (between 3-10%) and the cost of a broker’s fee is amortized over the life of the lease. Additionally, with many of the larger management companies offering one or two month’s free rent to entice potential tenants, on the books their rents are higher than the net monthly cost to the tenant. Citi Habitats calculates these averages based on the amounts for which apartments actually rented and does not include the impact of any landlord-offered incentives on the net rent, thus accounting for the rise in recorded prices. If one takes landlord incentives into account there may actually be a decline in monthly net rents on a one or two year lease.
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