This is a question that came into my mind when listening to people all over talk about the real estate bubble and the economy. I have lived here my whole life and see things a bit differently than most other people living here. In other parts of the country and even the world, there is very little, if anything, that can compare to the rental market here. China, Japan, London, San Fransisco are other areas that are tight markets overall, where the demand far outweighs the supply. None have the draw and lure of this city. So who really runs this town? Renters or landlords?
The rental market here is somewhat insulated from what happens elsewhere. Even in the midst of the recession periods dating back over 100 years, the vacancy rate here in Manhattan is never in double digits. Actually, for it to hit 1% or greater is actually viewed as the market having a surplus here. This means that there is always fierce competition for affordable (if you can call it that) housing in Manhattan. The higher end market sometimes seems to go faster when priced properly and in a sound location.
Honestly, the pricing is actually irrelevant as this city is all about location. For a solid location, the price can be what the market will bear. For example, a new building on the corner of West 72nd and Broadway, directly across from the 1/2/3 train station aptly named, "The Corner" has rented at least 75% of it's units with studios STARTING at $2975, 1BR's at $4600, 2BR's at 7950 and 3BR's at $16,000 per month. They began leasing earlier this year. I still can't figure out why you take a train if you pay $18,000 per month for a three bedroom. I would think sitting in traffic in a towncar with a/c is better than having Louie from the Bronx eat his bagel, Henry the Hipster from Harlem (used to be Larry Homeboy from the hood, not as much anymore) blasting gansta rap from his ipod and various shady individuals rub you up on your way downtown in 20 minutes on those sardine cans we call the subway, but what do I know?
This shows that while the rest of the country and even this city and state, are in a crunch financially, New York is still the most affluent city around. The landlords have always been in control historically. With the "crash" which was really more like an altitude adjustment of rents and sales prices here since the fourth quarter of 2008, the renters gained some ground as rent prices dropped 4% and sales prices became more negotiable through the last two years. The sales market is still a buyers market. We are still seeing some of the lowest mortgage rates ever, and the owners are having a hardtime finding buyers as mortgages are not getting approved as much for sub 700 credit scores. Rentals, is another story altogether.
There is a shortage of rental apartments as the vacancy rate has dipped below .90% again for the first time since the second quarter of 2008. The landlords can always rent directly and the renters can always rent directly. It's kind of like finding a needle in a haystack in this city though. That's a part of why broker's earn our fees. It's not just about turning a key or opening a door and being a bit of a tour guide. We screen, guide, advise, prepare and even serve as therapists more often than not.
Landlords have been offering a month of rent either free or towards the broker's fee. A standard broker's fee is 15% of the first year's rent (a little less than 2 months rent). Many broker's will settle for this concession from landlords when it's offered, as it helps everyone. The landlord gets a tenant that has been pre-screened by a broker rather than a random street-walker, the renter gets a decent apartment and saves almost two months rent and the broker gets a piece of a commission rather than no commission at all. As the market tightens, those concessions from landlords dry up. For a landlord, a person being able to pay the fee is more likely to be a model tenant. It speaks volumes to a landlord that someone is financially solvent enough and willing to pay an expert two months rent to find the best possible space, quality, location and price for the dollar.
I have seen those concessions vanish in high demand areas that they were never really offered in before. There usually is a catch when a landlord offers this. Either it's a large managment and the apartment has been vacant for a while, the monthly rent is the same as if you paid a fee yourself to a broker, the area is a fringe area (further from a subway or "developing" area) or the landlord is desperate to get it rented fast. Either way, you get what you pay for. Do the math and you'll see that finding a below market rent with a broker's fee involved, usually balances out better in the long run over two years or more versus a market rate apartment with yearly increases in the rent of 7-10%. If you don't have the money for a fee, than begin to expect five, six or even ten hour days, at least five or six days a week, of pounding the pavement looking for your next place.
The concessions have vanished a bit, but with the traditionally slower winter rental season approacing, I sense more will begin to pop up again in a month or so. This is the time where the renters will be able to negotiate lower monthly rents, perhaps get a fee paid from a landlord if they are going through a broker. Do realize that the landlord may ask you to sign a 16 month lease so that they get the apartment back vacant during the peak rental season and can get top dollar.
I guess the renters are in control in fringe areas. Those are hard to rent apartments and so when a landlord has someone interested, they can be a bit more agreeable. The owner has to offer free rent and or pay a month to the broker to ensure the units get rented and not sit vacant for months at a time. In high demand areas, there's no question about it. Let's be honest though, overall, the landlords have what we want as prospective tenants. Even when things can seem otherwise, they are always in control!
