Equity Residential Sees Manhattan Apartment Rents Flatteningby
Supply surge to `greatly influence' performance, Santee says
More than 6,700 new units to be listed in Manhattan this year
Equity Residential said rents on newly signed apartment leases on Manhattan’s west side may be flat this year as competition mounts from a surge of new supply coming to the area.
“The performance of our Manhattan portfolio will be greatly influenced by almost 2,000 new units on the Upper West Side, which makes up almost 30 percent of total revenue for our New York Metro area,” David Santee, the company’s chief operating officer, said on a conference call Wednesday to discuss fourth-quarter earnings.
Much of the new supply will consist of two- and three-bedroom luxury units, competing with similar apartments that Equity Residential owns and has recently found “more difficult to lease,” said Santee, whose company is the largest publicly traded U.S. multifamily landlord.
The options for well-to-do tenants across Manhattan are set to jump this year as more than 6,700 newly built apartments will be listed for rent, the most since 2005, brokerage Citi Habitats said in December. Most of the units will be priced in the top 10 percent, or luxury tier, of the market, where rents were little changed in December from a year earlier, appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate said in a report.
Landlords are already seeing signs of a slowdown in the market. Tenants were offered sweeteners, such as a month’s free rent or payment of broker’s fees, on 13 percent of all new leases in December, up from 7.8 percent of deals a year earlier, according to the Miller Samuel report.
Equity Residential owned 10,835 apartments across 40 buildings in Manhattan as of Dec. 31, the company said in its earnings report released Tuesday. The New York metro area -- which includes communities in Westchester County and northern New Jersey -- accounted for the greatest share of the company’s net operating income in 2015. For the past 16 quarters, Equity Residential’s Manhattan properties had average revenue growth of 4.9 percent -- a performance that may slip when when new buildings open on the west side, Santee said.
“We expect Upper West Side new lease rates to be flat or slightly positive until a majority of these new units will be absorbed,” Santee said on the call, noting that the disruption would be “short-term.”
“I don’t see New York falling off a cliff,” he said.
In December, Moinian Group opened Manhattan’s single largest rental tower on 11th Avenue and West 42nd Street, with 941 market-rate units. This month, the Durst Organization expects to begin leasing the 709 units at its pyramid-shaped rental building at 57th Street along the West Side Highway, according to its website. AvalonBay Communities Inc. has filed plans to construct a 33-story building with 160 units at the corner of Broadway and West 61st Street on a site it bought last year for $300 million.
Also on Wednesday, Equity Residential announced that it sold River Tower, a 38-story rental property on East 54th Street, for $390 million. It didn’t disclose the buyer. Equity Residential bought the building for $181.5 million in 2010 from Macklowe Properties Inc., according to city property records.