Record-Breaking Rents in Manhattan

In July, rents in Manhattan soared to a new high, driven by higher interest rates and low supply, reaching an average monthly rent of $5,588. This marks a 9% increase compared to last year and sets a new record. Median rent also hit a new high at $4,400 per month, while the price per square foot reached $84.74, according to a report from Miller Samuel and Douglas Elliman. It’s worth noting that this is the fourth time in the past five months that Manhattan rents have hit a record.

30% Increase Compared to 2019

Despite experiencing a population decline during the pandemic, average rents in Manhattan are now up by a substantial 30% compared to 2019. Jonathan Miller, CEO of Miller Samuel, believes that August rents could also reach new records, as it’s typically the peak rental month for families looking to move before the start of the school year.

“We could see another month of records,” Miller said.

Defying Predictions

Despite the population loss and the rise of remote work, Manhattan rents continue to soar, defying predictions of analysts and economists. The borough’s population dropped by 400,000 between June 2020 and June 2022, according to U.S. Census data. Although experts suggest that the population has increased since last year, it is still likely below 2019 levels.

In addition, offices in Manhattan remain less than half occupied as remote work prevails. According to Kastle Systems, New York offices were only 48% occupied at the end of July.

Increase in Inventory and Falling Leases

Surprisingly, the inventory of apartments for rent rose by 11% in July, even though the number of new leases signed declined by 6% compared to last year. This suggests that Manhattan renters may have reached their financial limit.

“It looks like rents are probably close to the tipping point,” Miller said. “We’re seeing transactions slip because of affordability.”

Wide-ranging Impact

The increase in rents affected all types of apartments, from small studio units to spacious three-bedroom ones. However, the larger and more expensive apartments have experienced the largest price increase since the pandemic.

While studio apartments have seen rent prices rise by 19%, average rental prices for three-bedroom units have surged by over 36%.

Factors Contributing to Limited Supply

Brokers attribute the shortage of rentals to the growth of Airbnb units and recent rent regulations. The introduction of rent regulations has taken tens of thousands of units off the market. Landlords argue that these laws, which limited rent increases on rent-stabilized units, made it unprofitable to renovate dilapidated apartments, resulting in many remaining vacant and unrentable.

Furthermore, many renters chose to stay even with rent hikes of 30% to 40% last year, further limiting the supply of available apartments.

“The vacancy rate is still low, making it very hard for tenants to secure an apartment,” said Janna Raskopf from Douglas Elliman. “Many tenants renewed their current leases and are staying put. I believe this trend will continue at least for the next couple of months.”