Unit B in 235 E. 13th St. in the East Village has sat empty since April 22. Back then, rent for this one-bedroom was $2750 a month, according to the apartment rental and sale website StreetEasy.
It has since dropped to $2,200 – a substantial 20% decrease. And it comes with a sweetener: either the landlord pays the broker one month’s rent, making it a no-fee apartment, or the tenant gets the last month for free, making its net effective rent $2017, a more than 26% decrease from the original.
Apartment 3 at 1005 Second Ave., a three-bedroom unit near pricey Sutton Place, has been vacant since late June. The broker Douglas Elliman initially listed it for $6,395, but has progressively lowered the price. Currently, it goes for $4700, a decrease of 26%, including a $300 drop a month ago.
These apartments and their prices represent a larger change in the rental market. In the continuing fallout from the COVID-19 pandemic and its associated economic damage, rents are dropping drastically across Manhattan.
According to the real estate firm MNS and its August Manhattan rental market report, the average Manhattan rent dropped 3.34% between July and August alone.
Average rents have fallen in almost all the borough’s neighborhoods. Year over year, the largest drops have occurred in the East Village (16.4%), the Financial District (15.4%) and in Murray Hill (14%). TriBeCa had the smallest decline; the average rent still decreased by 3.2%. Also on the lower end are Harlem (5.5%) and SoHo (6.2%).
In August 2019, one-bedroom apartments in Manhattan buildings without doormen rented for an average $3,316; now they’re going for $2,997.
Scott Sharp, a real estate agent for the Corcoran Group, recalls trying to find a tenant for an exclusive listing, a two-bedroom on the Upper West Side. “I showed it probably 20, 30 times,” he says. “Everyone is trying to get a deal right now. Everybody’s asking, ‘Will you take X?’ — cutting at least 15% off the rent price. And everyone was asking for a free month.”
Landlords prefer to give free months rather than drop the gross rent for a listing. They “always want the amount on the lease to be highest,” Sharp explains. “They want to keep the gross amount high so that it will reflect in the revenue streams.”
Moreover, “because of rent stabilization, if you lower the rents, a lot of apartments can only increase their rent by 2.5% each year,” Sharp points out. “Let’s say you have an apartment and you cut the rent by 10%, and you can only increase rent by 2.5% a year. It will take you four years to get back to the same price you are at.”
In extreme cases, Sharp has seen landlords agree to more than one free month. “Some people aren’t paying until the third month they live in a place, and that is huge,” he says.
Ari Lear, 22, graduated from Colgate University in May; she and two roommates have a Nov. 1 move-in date. “We figured things would pick back up in the city by this time and we wanted to take advantage of the great deals,” she says. Lear landed a tech job at Hulu in Manhattan and her roommates are working at Cowen, an investment bank in Manhattan, and Prudential in Newark. “We are moving here because we are ready to start our new chapter of life,” she says.
They searched StreetEasy for three-bedroom apartments, with a friend in New Jersey able to see apartments for them, though many agents offered virtual tours. “We might as well take advantage of the price drop before they start to go back up,” Lear says. “Who isn’t happy to save money on a shoebox in NYC?”
They found a place in TriBeCa that had dropped to $4700 a month, compared to the average $5300 rent in 2018 for a similar listing in the same building. “My roommate really wanted a 24/7 doorman, which this building has,” Lear says. “It was also important to all three of us that we have windows in our rooms, which we have.”
They got a great deal – no broker’s fee, and the rent includes utilities as well as building amenities like a heated swimming pool, rooftop sun terrace and sculpture garden.
Of course, Manhattan is still a more expensive place to live than most other cities. According to Zumper, an online rental company, in its September rental report, the median rent for a one bedroom apartment in greater New York ($2,700) is higher than Boston ($2,300), Los Angeles ($2,080), Washington, DC ($2,050) and Miami ($1750).
How long will the Manhattan buyer’s market last? “I think all of this is temporary,” says Jordan Cooper, a partner in the real estate firm Cooper and Cooper, “New York City is resilient. I’m with Jerry Seinfeld” – an allusion to Jerry Seinfeld’s recent article in the New York Times, encouraging people to not abandon the city.
“There is a vibrancy to New York City that doesn’t exist anywhere else,” Cooper says.
Inventory — the number of apartments on the market — is historically high, Cooper acknowledges. One reason is that newcomers “aren’t moving to the city quite yet. The third-year law school students, the second year MBAs and the seniors from college” would normally have been apartment-hunting from spring through fall.
“Why have they not come? Their jobs haven’t started yet,” Cooper says. “Many have been pushed back to fall, winter, early 2021. We are seeing remote work become commonplace.”
Meanwhile, “we see people who have left the city for suburbia, buying houses in Connecticut or renting in New Jersey,” Cooper says. “They want more space, they want a backyard, they want less density.”
But “when the virus is under control and people have to come back to a physical workplace, you are going to see that reverse.”
Until then, he sees some renters taking advantage of a soft market. “We do see some trading up,” Cooper says. “People that were in a walk-up, can now be in a doorman.”
Alessa Aichinger, a salesperson for Douglas Elliman, is less confident about a recovery. “We can only speculate and not predict the future of the American economy or the real estate market,” she says.
“If the infection rates stay at a lower level or go down even more and there is a vaccine and proper treatment for COVID-19, as well as the city’s plan to open up slowly is successful, things can change again. And rents could consequently stop dropping.”
(Photo of 235 E. 13th St. by Sebastian Biber)