For the New York City renter, 2009 likely felt like just deserts. After decades of consistently rising rents, landlords — perched atop a glut of rental stock — were forced to resort to desperate measures, including more or less paying people to sign leases.
Over the past year, incentives at big new doorman buildings have ranged from covering the broker’s fee to gifting a gym membership to granting one, two, three and sometimes even more rent-free months.
“It’s become a renter’s market,” says Khashy Eyn, CEO and president of brokerage Platinum Properties. “A lot of the people who live in Queens are able to move to Brooklyn, and a lot of the people who live in Brooklyn are able to move to Manhattan.”
But as we look forward to 2010, will the control remain in the renters’ hands? Or is the pendulum swinging back to favor landlords? The answer might be somewhere in the middle.
The age of the incentive is very much still upon us. Landlord-paid broker fees, for example, have become the norm.
“Fees are over,” Eyn says of the NYC rental market as a whole.
And buildings are still offering free rent. Take Downtown Brooklyn: There, 80 Dekalb is offering the first two months rent-free on a 14-month lease and BKLYN Gold, at 277 Gold St., is offering five months free split over the duration of a 24-month lease, according to Eyn.
However, deals overall aren’t as generous as they were during the summer.
“Incentives are not as aggressive right now,” says Daniel Baum, CEO of TDG/The Real Estate Group, which puts out a monthly Manhattan rental report. “Those were aggressive steps taken in the summer months in order to secure as many tenants as possible. But they brought the desired effects.
“I talk to a lot of [landlords]; they’re not at 100 percent, but they feel comfortable with the vacancy rates. They don’t feel it’s necessary to give as much, and they’re much more focused on the retention of tenants.”
“[At its worst] we got up to 3 percent,” Gary Jacob, executive vice president of Glenwood Management, says of the vacancy rate in his firm’s rental portfolio, which includes the new Emerald Green building in Midtown. “That would have been the highest we’ve ever had since I’ve been at the company — for 35 years.”
But vacancy at Glenwood is now back down to 2 percent, where Jacob says he feels comfortable.
“We’re at 97.8 percent occupancy,” says Sofia Estevez, executive vice president at TF Cornerstone, which has nine completed buildings in New York City and is planning to start construction on the next phase of a Long Island City rental project next year. “At 2 Gold St., which has 839 apartments, we have four vacancies, which is insane.”
That Financial District project, where a 189-unit second tower started leasing this past spring, rented at warp speed, thanks to incentives such as payment of the broker’s fee and two months’ free rent. Which is also what the company is offering at nearby 45 Wall St. Traffic in the Financial District, heavy in rentals, seems to be picking up, in general.
“We thought it would take longer [to rent units],” says Patricia Dunphy, senior vice president at developer Rockrose, about 200 Water St., where 576 units are more than 50 percent leased since August.
In fact, the appearance of a stabilizing NYC rental market has some developers actually raising prices.
“Rents had dropped 10 to 15 percent depending on the locale, but they are stabilizing,” says Jacob. “We’re able to push back. We’re raising them off the 10 to 15 percent. We’ve raised rents [at Emerald Green] 10 percent since we opened.”
The two-tower project is now 70 percent leased in the 303-unit north tower. The project will have a total of 569 units.
Though rents aren’t increasing across the board, Glenwood isn’t alone.
“We are seeing selected increases in rent. We’ve only seen this over the last month,” says David Wine, vice chairman of the Related Companies, which owns 17 rental buildings with 5,000 units in New York City, including the Upper East Side’s Monterey. “What told us [to raise rents] is that there was no availability . . . If you are 100 percent occupied and leased, there is pent-up demand.”
The company’s Chelsea rental product — which includes the Sierra at 130 W. 15th St., where rents have been raised — is doing especially well.
But just because rents are rising doesn’t mean incentives are disappearing. Emerald Green went from giving two months’ free rent to raising prices and giving away one month free.
“Certain landlords like to have a higher rent but give more free rent,” says Eyn. “But when the time comes to renew, you’re not getting that free rent anymore.”
Read: The landlord wins, having already locked in the higher rent. That said, if the market remains slow, landlords might end up having to renegotiate once leases are up and offer more incentives.
“I am projecting rent growth,” Estevez says of her forecast for the coming years. “Where we have been flat in my estimation, I am projecting growth for 2011 . . . The fact that we have such high occupancy is encouraging.”
One sign that the market could be improving: Some developers are looking to create additions to their rental portfolio.
“We would like to build more rental [buildings] in Manhattan,” says Christopher Albanese, principal of the Albanese Organization, which owns the Chelsea Vanguard on West 24th Street and the Solaire and the Verdesian in Battery Park City.
“We’re hoping within the next year, maybe two, the market will be such that you can buy land and build a rental and make a profit.”
FREEBIES:
80 Dekalb 2 months free on 14-month lease; 1-BRs start around $2,300, 2-BRs around $3,400
BKLYN Gold 5 months free on 24-month lease, 1-BRs start around $2,300, 2-BRs around $2,900
Emerald Green 1 month free; 1-BRs start at $2,950, 2-BRs at $4,450
2 Gold 2 months free; studios start at $2,315, 1-BRs at $2,915, 2-BRs at $4,015
45 Wall 2 months free; studios start at $2,135, 1-BRs at $2,900, 3-BRS at $4,200
200 Water St. 2 months free on 14-month lease; studios start at $2,165, 1-BRs at $2,875, 2-BRs at $3,905
The Monterey 1 month free or an Equinox gym membership at the nearby Brompton building; studios start around $2,300, 1-BRs around $2,800 and 2-BRs around $3,800
Chelsea Vanguard 1 month free; studios start at $2,400, 1-BRs at $3,300, 2-BRs at $5,500
The Solaire 1 month free; studios start at $2,550, 1-BRs at $3,150, 2-BRs at $5,300
The Verdesian 1 month free; studios start at $2,300, 1-BRs at $3,000, 2-BRs at $5,100