Rents in Manhattan reached an all-time high in July due to rising interest rates and limited supply.
According to a report from Miller Samuel and Douglas Elliman, the average monthly rent in July was $5,588, representing a 9% increase compared to last year. Median rent reached a new record at $4,400 per month, and the price per square foot hit $84.74. This marks the fourth time in five months that Manhattan has set new rental price records.
Despite the population decline during the pandemic, average rents in Manhattan have climbed by 30% compared to 2019. Jonathan Miller, CEO of Miller Samuel, predicts that August rents could set another record, as families typically seek to relocate before the start of the school year.
“We can expect another month of record-breaking rents,” Miller stated.
The surge in Manhattan’s rental prices has defied analysts’ and economists’ predictions. According to U.S. Census data, the borough’s population decreased by 400,000 between June 2020 and June 2022. Although the population has since rebounded, experts believe it has not yet reached 2019 levels.
Furthermore, Manhattan offices remain less than half occupied, primarily due to remote work. Kastle Systems reports that New York offices were only 48% occupied at the end of July.
Despite these factors, Manhattan’s rental market continues to thrive. Brokers attribute this to the limited availability of apartments for sale, which has compelled many potential buyers to rent instead. The borough has also seen an influx of younger workers since the pandemic.
Miller noted that while apartment listings are currently below the historical average, the inventory of available rental apartments increased by 11% in July. However, the number of new leases signed decreased by 6% compared to last year.
This combination of rising inventory and declining leases suggests that Manhattan renters may have reached their financial threshold, according to Miller.
“It appears that rents are nearing a tipping point,” Miller explained. “Affordability is causing transactions to decline.”
In July, rental prices increased across the board, ranging from small studio apartments to spacious three-bedroom units. However, larger and more expensive apartments have experienced the greatest price surge since the pandemic.
While studio apartments have seen a 19% increase in rent, average rental prices for three-bedroom units have risen by over 36%.
Brokers attribute the scarcity of available rentals to the growth of Airbnb units. Additionally, recent rent regulations have removed tens of thousands of units from the market, as landlords find it unprofitable to renovate dilapidated apartments due to limited rent increases on rent-stabilized units. Consequently, many apartments now sit empty and unrentable.
Brokers also pointed out that despite rental hikes of 30% to 40% last year, many renters chose to renew their leases, further limiting the supply of available rentals.
“The vacancy rate remains low, making it extremely difficult for tenants to secure an apartment,” said Janna Raskopf of Douglas Elliman. “Many tenants have chosen to renew their leases and stay put. I believe this trend will continue for at least the next few months.”
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