New York multifamily real estate: 4 key trends to understand
Manhattan, Brooklyn and Queens apartment rents set new records this summer.
Even for someone who’s been watching New York’s rental market for decades, the “sheer levels of extremes the market is seeing are noteworthy,” says Jonathan Miller, CEO and co-founder of real estate appraisal and consulting firm Miller Samuel Inc.
Across unit types and neighborhoods, rents have hit record or near-record highs in 2023, while vacancies and the inventory of available rentals are low.
“Everything is striving for an all-time record, if it’s not already an all-time record,” says Miller, who creates a closely watched series of market reports for real estate brokerage Douglas Elliman. Miller spoke with Story about the state of New York multifamily and shared five key takeaways from his latest report on rentals in Manhattan, Brooklyn and Northwest Queens.
1. New York City rents remain at or near record highs
Apartment rent growth may be slowing at the national level, but several New York boroughs have been seeing rents at record highs this summer. Here’s where median rents for new leases at market-rate rentals stood as of June, according to Douglas Elliman’s New York rental market report:
Manhattan: overall median rent up 6.2% year over year and the second-highest level since the report launched in 2008, after reaching new highs in each of the three prior months
- Studio median rent: $3,100
- 1-bedroom: $4,250
- 2-bedroom: $5,485
- 3-bedroom: $7,720
Brooklyn: overall median rent up 7.8% year over year, a record high for the third straight month
- Studio median rent: $3,000
- 1-bedroom: $3,308
- 2-bedroom: $3,929
- 3-bedroom: $4,584
Northwest Queens: overall median rent up 19% year over year, also the highest level recorded
- Studio median rent: $3,000
- 1-bedroom: $3,500
- 2-bedroom: $4,280
- 3-bedroom: $4,150
In all three areas, the share of leases with concessions, such as a month of free rent, was down from the prior year.
2. Apartment vacancies remain tight
Manhattan rentals’ vacancy rate has been rising over the past year. Still, between February and May, the rate remained below Manhattan’s average over the past decade, according to the Douglas Elliman reports. Even in June, when the vacancy rate climbed to 2.78% — up 0.88% year over year — it remained in line with the long-term average and was quite low compared with many other cities, Miller says.
That might come as a surprise to anyone who predicted an increase in remote work would kick off an exodus from the city. But while New York hasn’t fully recaptured population lost during the COVID-19 pandemic, Manhattan saw more people arrive than depart in 2022 and migration away from the outer boroughs slowed, Miller says, citing U.S. Census Bureau data.
“Work from home made the tether between work and home longer. Initially, people thought that meant you’d have a job in the city and live in the suburbs, but there are just as many people working from home on the Upper East Side of Manhattan,” he says.
The housing market is also a factor. When interest rates rose, it pushed some would-be homebuyers back into the rental market.
“It took a tight market and made it tighter,” he says.
3. Strong demand at all price points
Between the 2008 financial crisis and the start of the pandemic, the luxury end of New York’s rental market was bloated, Miller says. Rents for high-end units were rising more slowly than rents for more affordable units.
That’s no longer the case. In Manhattan, the median rent for luxury rentals — the most expensive 10% of rental units — was up 9.1% year over year in June. Upper- and mid-tier units’ median rents rose 5.3%, while the median rent for entry-level units jumped 9.8%.
The market is seeing strong demand across the price spectrum, in part because the supply is tighter. And that’s not likely to change anytime soon: Most projects in the development pipeline got underway before the pivot to higher interest rates, and since then, a lot of activity has paused, Miller says.
4. A shift to significantly more affordable rents looks unlikely
New York rents may have trouble sustaining fast-paced growth property owners saw last year, following a significant drop in rents earlier in the pandemic. But rents are far more likely to plateau at elevated levels than decline, Miller says.
“The only reason we would see meaningful improvements in affordability is if there’s a recession with substantial job loss,” he says. “With unemployment at 3.6%, it doesn’t seem like that’s imminent.”
By Lauren Zumbach from Story by J.P. Morgan