Oct. 13 (Bloomberg) -- Manhattan apartment rents climbed 4.9 percent in the third quarter from a year earlier as tenants opted to renew leases in a tightening market, leaving home-seekers to compete for fewer vacancies.
The median effective rent, or what tenants pay after landlord-sponsored incentives, increased to $2,970 a month from $2,831 a year earlier, according to a report by appraiser Miller Samuel Inc. and broker Prudential Douglas Elliman Real Estate. New leases declined 6.9 percent to 7,998, and the number of listings on the market dropped 1.9 percent to 4,605.
Stricter mortgage-lending standards and weak consumer confidence are limiting demand for home purchases, leading to increased competition for rentals, according to Jonathan Miller, president of New York-based Miller Samuel. Tenants are staying put as rents rise and a limited supply of three- and four-bedroom apartments prevents them from trading up, he said.
“Their options have become more limited,” Miller said in telephone interview. “You find more tightness as you move up in size, both in terms of what’s available and the jump in cost.”
Three-bedroom apartments commanded a median $6,295 a month before concessions, a 20 percent increase, and new rentals of units that size declined 35 percent to 327, the report showed.
Effective rents for all apartments were the highest since Miller Samuel and Prudential began tracking the data two years ago, Miller said. The average price per square foot rose 14 percent from a year earlier to $50.60.
Only 8.6 percent of new leases included sweeteners from landlords such as a free month, compared with 45 percent a year earlier, Miller Samuel and Prudential said.
The Manhattan sales market was driven by foreign investors and buyers of smaller apartments in the third quarter, according to an Oct. 4 report from Miller Samuel and Prudential. While sales increased 17 percent, the median price of a condo or co-op was little changed in the period from a year earlier.
Apartment hunters can’t afford to be too choosy as rental demand jumps, according to Gary Malin, president of New York-based brokerage Citi Habitats, which also released a report today. They may have to accept a walk-up over an elevator building, or a studio instead of a one-bedroom unit.
“Unless you have an unlimited budget, you sacrifice somewhere along the way,” Malin said by phone.
The vacancy rate for Manhattan rentals in the third quarter declined to 0.93 percent from 0.99 percent a year earlier, Citi Habitats figures show. Broken down by neighborhood, vacancy rates ranged from 0.52 percent in the West Village to 1.17 percent for Midtown East.
‘Tight All Over’
“It’s tight all over the place,” Malin said. “People are still moving to New York whether they have a job or not because the opportunity to find a job is greater here.”
New York City’s unemployment rate was 8.7 percent in August, according to the state’s Department of Labor. The U.S. rate was 9.1 percent in September and has been stuck at 9 percent or higher for all but two months in the last two years.
Nationwide, apartment vacancies dropped to 5.6 percent in the third quarter, the lowest since the same period in 2006, according to Reis Inc., a New York-based property-research company. The average monthly effective rent in the U.S. rose to $1,004 from $981 a year earlier, the company said.
Shannon Aalai, a broker with Citi Habitats, said Manhattan’s rental market was “steadily competitive” in the third quarter and many clients offered $50 to $100 more to land an apartment.
“This summer, more than any other, I had more people go over asking price,” Aalai said by phone. “There were some apartments that I didn’t even think were that great, and they were getting multiple applications.”
Erika Wirtz spent a day and a half in August viewing about 30 apartments with her fiance and narrowing the list to their three favorites. On the following day, they discovered their first two choices, both on the Upper East Side, were rented. Their broker alerted the leasing office of the building that was No. 3 on the list, in the Murray Hill neighborhood, that the couple were on their way.
“We got on the train on the Upper East Side and took the subway down to Murray Hill,” said Wirtz, 26, who works in marketing in Procter & Gamble Co.’s Prestige division. “When we got there 15 or 20 minutes later, the apartment was gone,”
The couple ended up renting an apartment in the same building, but on a lower floor.
“I never expected housing inventory to change over as quickly as it did,” Wirtz said.
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