Manhattan luxury rental prices fall as condo buyers seek tenants

Bloomberg

At One Riverside Park, a new luxury-condo tower on Manhattan’s Upper West Side, a never-lived-in four-bedroom apartment is available for rent at $22,995 a month, about $2,000 less than the owner was seeking in January.
The 2,830-square-foot (260-square-meter) dwelling, with floor-to-ceiling windows and panoramic views of the Hudson River, has competition for tenants. Forty-five percent of the 161 units that sold in the building have been put up for rent, according to an analysis by listings website StreetEasy.com.
A condo-development boom that added thousands of luxury homes to the Manhattan market is benefiting renters willing to pay up for high-end accommodations. Buyers — in many cases out-of-town investors — are taking possession of their new apartments and seeking to become landlords. That’s swelling the number of upscale rentals available and pushing down leasing costs for wealthy tenants.
“Luxury sales activity in Manhattan has brought more luxury rentals,” said Jonathan Miller, president of New York-based appraiser Miller Samuel Inc. “It’s the hidden supply entering the market.” The median rent for a Manhattan luxury apartment — defined as the top 10 percent of the market — fell 4.2 percent in February from a year earlier to $8,000 a month, Miller Samuel and brokerage Douglas Elliman said in a report.
It was the seventh time in the past year that prices for the borough’s costliest rentals were either flat or declined.
In contrast, the non-luxury rental market, bolstered by job growth and demand from those who still can’t afford to buy, had 23 straight months of annual rent growth before dropping 0.4 percent in February to a median of $3,235.

Investor Purchases
Luxury condos have attracted buyers from outside of Manhattan who have no intention of living in them, and the homes are rented out to defray the costs, Miller said. After London, New York is the most important city to ultra-wealthy investors, who view real estate there as a safe haven for cash, according to the 2016 Wealth Report by brokerage Knight Frank.
Of the 1,522 developer sales recorded last year in Manhattan’s newly constructed buildings, 559 — about 37 percent — were later listed for rent, according to StreetEasy. Buildings with some of the highest condo-to-rental rates include Zeckendorf Development LLC’s 50 United Nations Plaza, where 44 percent of the 39 apartments that sold last year have been listed for lease, StreetEasy data show.
At 93 Worth, a new condo building in Tribeca, 56 percent of the units sold by the developer became rentals. For Midtown’s Baccarat Hotel & Residences, 43 percent of the residences that sold were up for lease, according to the StreetEasy analysis.
The condos also have competition from traditional rental towers built by multifamily developers. This year, more than 6,700 newly constructed apartments will be listed for rent, the most since 2005, according to data from the new-development research division of Citi Habitats. Most of those units will be priced in the luxury tier of the market, the brokerage said in December.
“The rental market at the luxury end is seeing the same kind of trend that the sales market is seeing: a big amount of supply and perhaps some weakening demand,” said Alan Lightfeldt, a data scientist with StreetEasy. “Accordingly, prices are beginning to fall.”