Are concessions and a high vacancy rate a sign the rental bubble will burst?

Posted On Thu, December 15, 2016 By

Posted On Thu, December 15, 2016 By In Downtown Brooklyn, real estate trends

In the past year or so, there has been no shortage of talk about inventory glut, flat rental prices and bursting bubbles; Now, Slate blogger Henry Grabar has rustled up some numbers and real-life examples to go with the chatter, and we’re guessing they weren’t too hard to find. According to Grabar, a vacancy rate at its highest since 2009 (with a staggering amount of inventory in the pipeline), and the percentage of rental price chops at a record 42 percent in October point to an impending renter’s market of comparatively epic proportions.

rental agreement

The key is that “comparatively”–it’s hard to deny a softening rental market, but just how much slack we’ll see depends on how much of a bubbliever you are. Bubble or no, though, New York City’s renters have been spending a disproportionately sizeable and growing amount of their incomes on rent for some time. At the same time, we’re reminded that new construction has virtually wiped out any vacancy void and, we’re told, “White-collar tenants are less geographically selective than they used to be.”

Grabar reminds us of the impact that years of skyrocketing rents have had on the city overall, from record homelessness to a palpable crisis in NYC’s identity as a ” haven for the castoffs and dreamers of middle America and strivers from the rest of the world.”

But what of the slide in residential rents that looms on the horizon? It’s being said that New York City rents are tumbling faster than in other pricey U.S. cities, and most real estate watchers agree that rent prices have softened or stabilized at the very least.

Are rents are on the edge of an even bigger decline? And what about those numbers? Charts from real estate price trackers show discounts like free rent and vacancies are at a seven-year high. And though that may make the situation seem like business as usual, Grabar points to Downtown Brooklyn, where an unprecedented building boom has created a new skyline seemingly overnight, with almost every new building offering between one and four months of zero rent.

More statistics:

  • According to Citi Habitats, 27 percent of Manhattan transactions featured a “concession” in November 2016—meaning real, lower rates for tenants aren’t being reflected in rent data.
  • The concession rate has more than doubled since last year.
  • Douglas Elliman reports that rents are down in Brooklyn and Manhattan and also says that concessions have doubled in both boroughs from this time last year.

And Grabar makes the point that those numbers and reports are months out of date and that a sampling of very recent listings points to an even steeper decline.

Grabar cites examples from Stephen Smith at Market Urbanism: A Williamsburg one bedroom down to $2,500 from $3,500 in 2014—with a free month’s rent. An East Village one bedroom at $2,695—same as its rent in August 2009—and still unrented.  A Hell’s Kitchen one bedroom, rented in 2014 for $3,750, down to $3,250, and still unrented. Those are anecdotes, to be sure, but there sure are a lot of them.

And that inventory glut would be a tough thing for anyone to argue with, as is the fact that it’s just beginning; 2015 was a record year for residential building permits, with total permits topping 50,000—hitting levels not seen since 1963, as 6sqft reported–and a lot more on the horizon. And it’s that horizon that’s easiest to pin a rent slide on: Says Grabar, “That skyline in Downtown Brooklyn? That’s what a tenant’s market looks like.”

[Via Slate]

RELATED:

Tags : , ,

Neighborhoods : Downtown Brooklyn

MOST RECENT ARTICLES

  • Oldest home in Brooklyn Heights is on the market for $6.65M

    Oldest home in Brooklyn Heights is on the market for $6.65M

    Built in 1824, 24 Middagh Street is a charming, wood-frame, Federal house in Brooklyn Heights that has the distinction of being ...
  • Rare footage from Coney Island’s giant cycling Velodrome of yesteryear

    Rare footage from Coney Island’s giant cycling Velodrome of yesteryear

    Cycling culture in New York City has been a growing trend for over 20 years. However, its popularity and the bike lanes ...
  • Developer will turn Connecticut lighthouse into a giant playroom for his grandkids

    Developer will turn Connecticut lighthouse into a giant playroom for his grandkids

    In 2004, New York-based developer and builder Frank Sciame paid $6 million for the 3.4-acre waterfront Connecticut estate of the ...
  • The top 20 most congested cities when it comes to traffic

    The top 20 most congested cities when it comes to traffic

    Rush hour traffic is as predictable as the sun setting at night for New Yorkers, but drivers might be shocked ...
  • Get ‘healthy’ frosting shots at Gwyneth Paltrow’s midtown cafe; L train replacement to be announced this fall

    Get ‘healthy’ frosting shots at Gwyneth Paltrow’s midtown cafe; L train replacement to be announced this fall

    The Driverless Future Challenge seeks proposals that actively shape the city’s response to driverless cars. [Blank Space] Gwyneth Paltrow is ...
  • Impeccably restored apartment in an 1839 Greek Revival townhouse asks $12,495/month in the Village

    Impeccably restored apartment in an 1839 Greek Revival townhouse asks $12,495/month in the Village

    The listing brags that this Greenwich Village co-op looks like something out of a movie, and we’d have to agree. ...
  • Buy Karim Rashid’s sleek Hell’s Kitchen condo for $4.75M, candy-colored furniture and art included

    Buy Karim Rashid’s sleek Hell’s Kitchen condo for $4.75M, candy-colored furniture and art included

    Industrial designer/architect (and lover of all things pink and white) Karim Rashid once told 6sqft, “Color is life and for me, ...
  • 125-year-old Cathedral Church of St. John the Divine finally declared a city landmark

    125-year-old Cathedral Church of St. John the Divine finally declared a city landmark

    On Tuesday the Landmarks Preservation Commission voted unanimously to designate the 125-year-old Cathedral Church of St. John The Divine, the ...
  • Inside New York’s little-known graphic design museum, The Herb Lubalin Center

    Inside New York’s little-known graphic design museum, The Herb Lubalin Center

    Icy, metallic, and unabashedly serious is how one might describe The Cooper Union for the Advancement of Science and Art ...
  • Jeanne Gang’s ‘Solar Carve Tower’ begins its rise on the High Line

    Jeanne Gang’s ‘Solar Carve Tower’ begins its rise on the High Line

    For an architect who had yet to break into the NYC scene, Jeanne Gang is now moving full steam ahead. ...
  • $2.5M artist’s townhouse in Clinton Hill has a painter’s studio, full bar, and color everywhere

    $2.5M artist’s townhouse in Clinton Hill has a painter’s studio, full bar, and color everywhere

    This three-story, two-family Clinton Hill townhouse at 578 Myrtle Avenue, zoned to allow a commercial establishment on the ground floor, has ...
  • Historic Clinton Hill carriage house gets light from a ‘sky volume’ and a courtyard carved into its core

    Historic Clinton Hill carriage house gets light from a ‘sky volume’ and a courtyard carved into its core

    A thoroughly transformative re-design by New York studio O’Neill McVoy Architects turns a historic red brick townhouse on a slender 24- by 76-foot ...

SIGN UP FOR OUR NEWSLETTERS

Thank you, your sign-up request was successful!
This email address is already subscribed, thank you!
Please provide a valid email address.
Please complete the CAPTCHA.
Oops. Something went wrong. Please try again later.