A new forecast by online real estate marketplace Ten-X predicts that New York City’s apartment vacancy rate will exceed 11 percent by the end of next year as thousands of apartments hit the market, the Wall Street Journal reports. The study also points to a slowing job growth rate, which drives the rental market, as a factor in what could be a “grim reckoning” for landlords.
With residential construction–like Manhattan’s Hudson Yards development and Brooklyn megaprojects like Greenpoint Landing–putting thousands of apartments in new buildings on the market, the report predicted that rents will slide. The city’s vacancy rate, normally in the low single digits, is currently at 3.8 percent, below the nation’s vacancy rate of 4.4 percent.
According to the report, 10,000 new apartments in buildings with more than 40 units have hit the market in the past year, and that total is on track to top 40,000 units by the end of 2018. The report puts New York City in the number one spot among top sell markets–one in which owners of multifamily properties might find selling an attractive prospect due to the possibility of declining rental incomes.
Rents have already been falling (with landlord concessions taken into account), and the report predicted that rents would decline by 2.7 percent annually through 2020. Owners may see their operating income decline by an average of 4.5 percent during that time.
Marketing consultant Nancy Packes, who works closely with developers, said the prognosis of a softening rental market “didn’t make any sense.” The report may not take into account the fact that softer rents might actually cause renters to be drawn to markets like Manhattan and Brooklyn, along with renters who can’t afford to buy due to high condo and co-op prices.
Peter Muoio, chief economist at Ten-x, said the forecast was tempered by the fact that lenders have been more conservative in the current economic cycle, though “It seems inevitable that you are going to see some pain in the market.”
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