A weakening of the Manhattan apartment market was seen this year, with rents falling as landlords lost their pricing power because of an increase in new listings and tenants scouting for better deals, reports showed.
According to a report from brokerage firm MNS, the $3,999 average monthly rent for the month of October was down 2.68 percent from a year earlier, while another report released Thursday by Miller Samuel Inc. and Douglas Elliman Real Estate showed that the median monthly rent was $3,396, down 1.2 percent from September 2015.
This is reportedly only the second year-over-year decline since February 2014, after rents fell this March.
“We have noticed that the younger generation is not as location focused as they are building focused,” said MNS Chief Executive Andrew Barrocas, explaining that tenants were choosing newer developments in Jersey City, Brooklyn and Queens over the older establishments in Manhattan.
“It’s going to take a while to work itself out,” Jonathan Miller, president of Miller Samuel, told Bloomberg in an interview. “The market does not appear to be resuming an upward pattern anytime soon.”
There has been a growth in the supply of rental properties in urban centers, while the demand is not picking up pace. It is combined with a slowdown in the growth of high-paying jobs in major cities like New York and San Francisco. Even in the bigger cities, rental buildings remain vacant for longer stretches of time as more consumers look toward the suburbs, Fortune reported data from CoStar, another real estate research firm.
“Many building owners have to rely on incentives to give tenants the sense of ‘value’ they seek,” Gary Malin, president of Citi Habitats, said in a report by the brokerage firm. “Savvy owners will do what it takes to move their available inventory as fall progresses.”
A similar trend can be spotted in a number of other expensive U.S. cities with apartment rents falling for the first time since 2010. Houston saw a fall of 2.75 percent, San Francisco of 0.51 percent while San Jose, California, saw a dip of 0.79 percent in the third quarter of 2016, a new report from apartment data firm Axiometrics showed.
However, other places in the U.S. continued to see a rise in rent, averaging at a 2.99 percent increase in the third quarter of the year, compared with the same period a year ago.