6sqft recently reported on a forecast by online real estate marketplace Ten-X predicting a precipitous threefold spike in New York City’s apartment vacancy rate that could even exceed 11 percent by the end of next year as thousands of new apartments hit the market, adding up to a “grim reckoning” for landlords. Now, a Crains reporter tells us that skeptics like marketing-consultant-to-developers Nancy Packes, who said the prognostication of a rental market meltdown “didn’t make any sense,” could be right after all.
So will the city’s vacancy rate hit 11 percent by 2018? Intrepid real estate reporter Joe Anuta says, “Don’t count on it.” According to Anuta, the city’s vacancy rate, which is by most accounts less than 4 percent, wouldn’t be affected much even if all of the 40,000 new rental units referred to in the previous report remained empty; the vacancy rate would only rise by “a nominal amount,” though even if half that many units stood unloved and unrented, “the result would send a shock wave through the city’s entire housing landscape” because even a meager five percent vacancy rate would nullify the state’s rent-regulation laws and turn over a million apartments to market rate, which hasn’t happened since those laws were first enacted after World War II.
Which is to say that event, too, is unlikely. Apparently the report only accounted for “a very specific subset of the market and not the city as a whole.” The doomsday data, it turns out, tracked just market-rate apartments in buildings outside Staten Island with over 40 units, which account for only 10 percent of the city’s two million rentals. Oops.
But what about Manhattan’s Hudson Yards and Brooklyn megaprojects like Greenpoint Landing–both of which are putting thousands of rental apartments, at market rate, with more than 40 units, on the market? Also not mentioned in the Ten-X document, but just as confusing, was the fact that significant vacancies in some large buildings could actually materialize. Mentioned by Anuta, and stuff we knew, is the possibility of high-rises being built in Downtown Brooklyn and Long Island City adding enough new apartments to the market to make rents come down, and that landlords are subsequently lowering rents, offering concessions, or keeping units vacant in the hopes that rents will bounce back, which the slightly discredited Ten-X report says is unlikely.
Let’s get this straight: A particular market segment made up of only 40-plus-unit rental market rate buildings outside Staten Island might suffer vacancy issues, which would make landlords sad and renters happy, but otherwise NBD. Which means there’s one less thing to worry about on a Monday.
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- As Rental Inventory Increases, Landlords Are Offering Up More Concessions