Jun
15

Record Setting Low Vacancy for NYC Apartments

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Manhattan is one of the foremost apartment markets in the country, featuring some of the highest rents and features an extremely affluent tenant base. While there are a variety of rental housing types in New York City, including extensive rental units, vacancy is low across the board. The 167,000-unit market-rate investment-grade apartment market has the lowest vacancy rate among the top Reis markets, a rate lower than the low-point of the prior cycle. New York City is set to test the limits of how low its vacancy can fall and how high its rents can rise. The city’s household average income is forecast to increase 27.7% during the half-decade from 2011 to 2016. With the vacancy rate down to frictional levels, effective demand is constrained to the extent of new supply. And new supply is hard to come by in a densely developed city where buildable sites are scarce and expensive

Record Low Vacancy

  • Reis reports a New York Vacancy rate of 2.0% for first quarter 2012, down from fourth quarter 2011 and first quarter last year. 
  • The number of vacant market-rate units have fallen below 3,400 and rent regulated and subsidized units are generally even harder to find. 
  • Vacancy rates are predicted to fluctuate within 10 basis points of its current level through 2015.

Search for New Supply

  • Demand is being quelled by the limited amount of new supply. 
  • Net absorption was only 526 units in the first quarter follow a two-year surge, but is expected to end 2012 at more than 4300 as more units become available to absorb. 
  • Approximately 780 market rate apartments were added in the first quarter according to the latest new construction data leaving nearly 5800 under construction.
  • The first quarter also saw 423 condominium units completed, leaving about 1830 under construction.  Condo construction is down from the housing bubble years and in the past four quarters 553 condo units have gone rental.

Rents Still Increasing

  • The average asking rent was $2953 per month, unchanged in the first quarter 2012 and the average effective rent was up .3% to $2885 per month.
  • Reis predicts an increase of 5.1% asking and 6.0% effective for 2012 and 5.0% to 6.0% for each year from 2013 to 2016.
  • Rents will rise until excess demand is depleted.

From ReisReports

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