MARKET SNAPSHOT: Vacancies and Rents at Extremes in Manhattan; New Development Slowly Materializes
By Philip Shea, Associate Editor
Overall vacancy in Manhattan remained at an incredibly low rate—just over 1 percent—in the first quarter of 2012. Meanwhile, average rents in New York City’s main borough soared 3.4 percent between January and March alone—to $3,590 per month.
The main culprits for these conditions are an increasing number of renters—many of whom have fled single-family—and limited available inventory, which is partly the result of the economy but also reflective of the limited space for new development in the densely populated borough.
Local real estate brokerage firm CitiHabitats notes that overall vacancy fell another 9 basis points in the month of April alone—from 1.25 percent to 1.16 percent. The average price for a studio in this time frame shot up 4 percent to $2,025 per month, while the average for a three-bedroom apartment jumped 2 percent to $5,186 per month.
While permits for new construction increased dramatically over the last year, Marcus & Millichap notes that actual activity remains 65 percent below pre-recession levels, underlining continued uncertainty about the economy. The city overall is expected to gain around 6,300 new market-rate units before year’s end, well below the over 20,000 permits issued.
There is one development, however, that many analysts and investors are highly anticipating. The Hudson Yards redevelopment project is being touted by the city of New York as the “last frontier available in Manhattan,” as developable land becomes increasingly scarce on the 23-square-mile island. Developed by The Related Companies and Oxford Properties, the multi-use project will include 5 million square feet of residential space and 7.3 million square feet of office and retail space.
With the first phase expected to be completed in 2015, the project will take advantage of the various amenities in the area—such as access to multiple subway and rail lines; proximity to popular recreational areas like the High Line and Hudson River Park; and proximity to Madison Square Garden and multiple convention centers.
In keeping with increased demand for apartments, Marcus & Millichap reports that employment increased 1.9 percent between 2011 and 2012, with nearly every sector gaining positions. Tourism also reached record-high levels last year, translating to the addition of 28,000 jobs in the leisure, hospitality and transportation sectors. Overall payrolls are expected to increase another 2.1 percent in 2012.
As far as which neighborhoods are commanding the most value, the financial district remained the most expensive neighborhood in which to rent Manhattan, with average studio prices coming at $2,540 per month and three-bedrooms going for $5,500 per month. Washington Heights was the cheapest neighborhood with studios at $1,250 and three-bedrooms at $2,350.
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