Sky-High Rents In New York: Take It or Leave It
From the Wall Street Journal
May 17, 2010

By Dawn Wotapka

Bloomberg NewsThe frenzy for Manhattan rentals is making a comeback, a sign of a rebound in the nation’s largest and most complex leasing market. With the number of available apartments falling, New Yorkers are having to again be competitive and aggressive to score a (closet-sized) address, the Journal reports.

Need evidence? Ask Alexis Spadaro. She saw a two-bedroom unit on Morton Street in the West Village twice recently. She decided last weekend to go for it. But the $7,500-a-month apartment was already taken.

“You wouldn’t know that there was a recession if you were trying to get an apartment,” said the actress planning to relocate from Los Angeles. “If I see something and I like it, I have to take it.”

Talk about a change. As the market remained paralyzed in the aftermath of the financial crisis last year, that Morton Street apartment might have languished empty, forcing the owner to cut the monthly price or throw in a free month or two of rent. During the downturn, plenty of New Yorkers negotiated lower rents or decided to move into a better neighborhood. But that was then. While rents remain down from the peak, the market is in transition.

“The rent reductions are pretty much over. It’s bottomed,” said Hessam Nadji, managing director of Marcus & Millichap, a real-state-investment brokerage firm. “The worst is over and we’re starting to firm up, the stage is set for rent growth of 4% to 6% in 2011.”

Across Manhattan in March, the average rent for a one-bedroom was $2,341, while two bedrooms came in at $3,289, according to Citi Habitats. That’s down 4.2% and 7.4%, respectively, from a year earlier, but up a hair from $2,335 and $3,283 in February. (We realize that would pay the mortgage for a mansion in much of the country.)

Plenty of people are willing to pay that amount. But there isn’t much to go around: The vacancy rate in Manhattan, where most of the housing stock is rentals, is already declining. It came in at 1.38% in March, below February’s 1.54% and down from 2.46% a year ago, according Citi Habitats. The national rate is 8%.

Another sign of healing: Negotiating for better lease terms is no longer a given. After two years in the driver’s seat, renters at all price points are seeing their control weaken. More landlords are sticking with their asking rents and offering fewer freebies, a shift that coincides with the arrival of the peak season.

“Now it’s sort of take it or leave it,” said Robin Schneiderman, senior vice president with Citi Habitats. “People are taking things occupied and even renting before the renovations are done. You didn’t really see that.”

If you’re a renter looking for a bargain, it gets worse. Fewer landlords now are paying broker fees, typically a month’s rent. Equity Residential, the region’s largest public apartment owner, has said it is paying the fee in fewer buildings.

No landlord has offered to pay the fee for Ms. Spadaro. She’s seen more than 50 apartments in the last year.