“There’s some crazy stuff going on in New York.” David Neithercut, President and CEO of Equity Residential, told Bloomberg in April during the company’s Q1 Earnings Call. COO David Santee sums up why: “We had to join the concession party to close deals.”
Equity Residential is following a growing trend of many other New York City landlords, and is doing so out of necessity. They are under immense pressure to keep their buildings full in the face of increasing vacancy rates. According to the June 2016 Elliman Report, in Manhattan, “The vacancy rate rose from 2.07 percent to 2.3 percent when compared to the same month a year ago, and is the highest vacancy rate for June in four years.” The report also notes that the median rental price is up 2.2 percent since last June, and the number of new leases is up 33.5 percent as tenants continue to push back against increases applied at the time of renewal. Tenants were offered concessions on 9.7 percent of all new leases, up from 3.9 percent last June. While this has become a point of stress for landlords (Equity Residential alone gave an estimated $600,000 in concessions during the first quarter), as you may have guessed, this is great news for prospective renters.
Landlord concessions had been virtually nonexistent for the two years prior to an initial comeback in 2014. In a February 2014 Daily News article entitled, “They’re back! Manhattan landlords are starting to offer concessions again as tenants push back,” Phyllis Furman cites a Citi Habitat report to prove that this new trend is necessary. She states, “The concessions helped lower the vacancy rate in Manhattan, which fell to 1.62 percent in January from 1.82 percent in December. It was the lowest Manhattan vacancy rate since September 2013’s rate of 1.48 percent.” The concession trend remains strong for Citi Habitats. According to a Bloomberg News report featured last month in Crain’s, “17 percent of Citi Habitat’s new leases it brokered in the month of May carried some form of landlord sweetener—the most for May since 2010.”
Equity Residential and Citi Habitats aren’t the only landlords that have been offering concessions lately, and in fact are just two of many. The city’s major landlords who manage hundreds of apartments in large and luxurious buildings have joined the bandwagon as well, like Rose Associates, Related Companies, Vornado Realty Trust, and Rockrose Development Corp. Concessions are most typically one month’s free rent or payment of broker fees. Related Companies has even started offering MasterCard gift cards up to $1,000 upon leasing.
The buildings in which landlords are offering these concessions are top-notch. Many offers are rolling in for brand new buildings, like Related’s 1214 Fifth Avenue (2016) and Abington House (2014), and Rose Associates’ The Larstrand (2013) and Aalto57 (2016). All typically include a fully attended lobby with a 24-hour doorman, a concierge service, a parking garage, a state-of-the-art fitness center, a pool, a furnished rooftop terrace, elevators, a resident lounge, and a children’s playroom. The apartments feature gourmet kitchens and five-fixture baths, and often floor-to-ceiling windows.
And Manhattan isn’t the only spot that has seen a spike in landlord concessions. Bold New York’s 60 Duffield Street in Brooklyn is offering up to three months free rent, and City Point’s 7 Dekalb is offering up to two. Both apartment complexes stand newly completed in Downtown Brooklyn. The Elliman Report shows that Brooklyn’s concessions are up 3.2 percent since last June, more than doubling from 3 percent to 6.2 percent. The trend has begun to spread to Long Island City as well; Ekstein Development is offering up to two months of free rent at newly completed 26-14 Jackson Avenue and 44-72 11th Street.
CityRealty has been tracking concessions in all of New York’s major buildings in all five boroughs. The below map highlights where potential leasers can find the best bargain opportunities.
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