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Rents in Manhattan hit a new high in July, as higher interest rates and low supply continued to drive up prices.
The average monthly rent in July was $5,588, up 9% over last year and marking a new record. Median rent, at $4,400 per month, also hit a new record, along with price per square foot of $84.74, according to a report from Miller Samuel and Douglas Elliman. It was the fourth time in five months that Manhattan rents hit a record.
Despite a loss in population during the pandemic, average rents in Manhattan are now up 30% compared to 2019. Jonathan Miller, CEO of Miller Samuel, the appraisal and research firm, said August rents could mark a new record because it is typically the peak rental month as families look to move before the start of the school year.
“We could see another month of records,” Miller said.
Manhattan’s soaring rents have continued to defy 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. While experts say the population has increased since last year, they say it is still likely below 2019.
What’s more, offices in Manhattan remain less than half occupied due to remote work. According to Kastle Systems, New York offices were only 48% occupied at the end of July.
Yet despite the population loss and rise of remote work, Manhattan rents continue to soar. Brokers say the lack of apartments for sale, due to higher interest rates, have forced many would-be buyers to rent. Younger workers also have flocked to the borough since the pandemic.
Miller said that while the number of apartment listings are below the historical average, inventory of apartments for rent actually rose by 11% in July. At the same time, the number of new leases signed declined by 6% compared to last year.
The combination of rising inventory and falling leases suggests that Manhattan renters may have finally reached their financial limit, Miller said.
“It looks like rents are probably close to the tipping point,” Miller said. “We’re seeing transactions slip because of affordability.”
The increase in rents in July was across the board, from small studio apartments to sprawling three-bedrooms. Yet the larger, more expensive apartments have seen the largest increase in prices since the pandemic.
While studio apartments have seen rent prices up 19%, average rental prices for three-bedroom units are up over 36%.
Brokers say one reason for the dearth of rentals is the growth in Airbnb units. Recent rent regulations have also taken tens of thousands of units off the market, brokers say. Landlords say the laws, which limited rent increases on rent-stabilized units, made it unprofitable to renovate dilapidated apartments. As a result, many are now sitting empty and unrentable.
Brokers add that even with rent hikes of 30% to 40% last year, many renters chose to stay, which also limited supply.
“The vacancy rate is still low, making it very hard for tenants to secure an apartment,” said Janna Raskopf, with 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.”