Manhattan landlords offer sweeteners, drawing would-be buyers
Manhattan landlords are offering tenants more deal sweeteners than a year ago as developers continue to add supply, and mortgage rates and taxes are drawing in would-be homebuyers willing to stick it out a while longer in the rental market.
Landlord concessions and agreements to cover broker fees in the borough jumped to 37% of new leases in September from 27% a year ago, the most in four months, according to a report Thursday from Miller Samuel Inc. and Douglas Elliman Real Estate. Free rent also added more cushion for renters, with owners agreeing to waive or cover an average 1.3 months, up from 1.2 months last year.
As potential homebuyers confront rising mortgage rates, tax hikes and attractive leases, many are deciding to forgo buying for now in exchange for renting.
"That's their initial thought process," said Hal Gavzie, Douglas Elliman’s executive manager of leasing. Committing to a lease for a year or two before deciding whether to buy helps "relieve the pressure right at this moment, or if they’re uncertain about certain things."
Manhattan rents excluding concessions are also up, rising for the first time since May. Median base rents rose 2.8% from a year before to $3,495, while net effective rent — which adjusts for concessions and other deal sweeteners — gained 1.8% to $3,394. Landlords often offer one of more rent-free months in a lease term before cutting rents, so when the lease is up for renewal, it's from a higher base.
This time next year, Gavzie expects the share of leases with concessions will be close to where it is now, and that they'll still be tied to high inventory.
"It's really tough, to be honest," he said. "There's so much that has hit the market that I don't know if 12 months is enough to absorb this all."