From New York Times

December 27, 2001

For Renters, the Map Is Redrawn


O what if Santa didn't treat you right? You can go out and rent yourself a bargain apartment. Thousands have been marked down in Manhattan in the last three months, and good deals are emerging in some pockets where you would never expect to find them.

Remember when Chelsea was so overrun with celebrities and moneyed culture vultures that you couldn't get a broker to call you back? Now agents are handing out their cellphone numbers to customers with abandon. Even parts of the Upper East Side, with its white- gloved doormen and entryway flower beds, are suddenly drifting back to earth. For the last three years, Manhattan's new renters didn't stand a chance. If they didn't write a whopping check at first sight including two or three months' deposit 20 people were lined up at the door, willing to do so.

But landlords have stopped gloating. On the eve of 2002, brokers are proclaiming a renters' market. Last week, Halstead/Feathered Nest, one of the largest real estate agencies in New York City, reported that rents had been marked down on about half the units on the open market (those that are not rent-controlled or rent- stabilized or in subsidized low-income housing). The Corcoran Group, another large real estate company, said that since Sept. 11, landlords have reduced the rents they are asking on more than 5,000 apartments.

Anyone who has read a newspaper lately knows that landlords in Lower Manhattan, particularly in Battery Park City and the financial district, have been offering apartment hunters and current tenants discounts of up to 25 percent. But what they may not know is that reductions elsewhere in Manhattan average 10 to 30 percent, with the biggest concentrations in five less obvious areas: Chelsea, the West 40's and 50's, the East 40's around the United Nations, the eastern edge of the Upper East Side and the Upper West Side between 97th and 110th Streets.

"We need people to come back and rent," said Silvia J. Aboud, who manages rentals for Bellmarc Realty. "The landlords were used to having it all their way. But poof! Suddenly the renters are starting to breathe again." On Friday, Ms. Aboud gave a quick tour of six apartments for rent on the Upper East Side and in the East 40's, all marked down. Juggling listing sheets in the back of a taxi, she said that with more time, she could have shown 25 apartments under $2,000 a month, all on the Upper East Side.

Brokers say that as the economy has softened, neighborhoods with too many new rental buildings have inevitably been hit hard by bargain seekers, who are demanding 20 and 30 percent reductions, along with extras like one or more months rent- free and discounts on health club memberships. In a deluxe new building called the Pennmark near Pennsylvania Station (an area called the Tenderloin in the days of Boss Tweed, but now advertised as Chelsea), the developer has just dropped the rent on a two-bedroom apartment with two bathrooms, granite kitchen countertops and Woody Allen views of the Hudson River and downtown. Not only has he reduced the rent to $4,000 a month, but he's also offering to forgo three months' rent 25 percent off a year's total. He is throwing in a year's free membership in the rooftop health club.

Last December, the same Pennmark apartment would have cost closer to $5,000 a month, according to Daniel Segal, the rentals manager for Douglas Elliman, the city's largest real estate company.

A $4,000 apartment may not sound like a bargain especially to a tenant paying next to nothing for a rent-stabilized palace. But Manhattan's developers are wheeling and dealing, especially in neighborhoods on the edge on the far West Side or far East Side where construction of new rental towers has boomed in the last five years. Mr. Segal said all his rental customers are worried by the worsening economy "and would rather go to prime neighborhoods than the corners and edges of the city." (Some of them are buying. Brokers say that, with mortgage interest rates so low, the co-op and condo market has not been hit nearly so hard as the market for renters.)

On the Upper East Side, renters are finding reductions of 30 to 40 percent in some buildings, said Ms. Aboud of Bellmarc. Describing a $1,100-a-month studio near Gracie Square, she said that security was good in the area because the mayor's residence is there. "Dobermans patrolling," she said. "You name it." The apartment would have been taken "in a heartbeat" a year ago, she added.

Ms. Aboud said that east of Midtown, around the United Nations, many landlords are dropping the rents they are asking by 30 percent and sometimes throwing in a month or two rent-free.

"What's really crazy is that landlords, instead of giving one month's free rent, are giving two months and the customers aren't biting," she said. Two months' free rent on a one-year lease is a 16.7 percent reduction.

"But tenants don't have business minds," she continued. "They don't get it. They say, Why don't they drop the rent more?" (The reason is that landlords are hoping the market will improve. In addition, they got their construction loans by promising banks that they would charge higher rents; if they reduce rents too much, the banks may demand more collateral or even call in their loans, although that is unlikely.)

In one 1960's building with doormen in the East 40's near Second Avenue, Ms. Aboud showed a glamorous two-bedroom apartment with new white marble floor-to-ceiling tiles in the bathroom and black granite countertops in the kitchen. "It used to be $2,800," she said. "Now it's $2,350, and the developer told me yesterday he'd do the deal for $2,200." She paused. "And he'll throw in a month's rent."

Since Sept. 11, nearly all property below Houston Street whether for sale or for rent has suffered. But in the rest of Manhattan, including Harlem, the biggest, most expensive apartments were the first to be hit. (One Chelsea loft was originally priced at $14,000 a month but was cut to $7,500, Mr. Segal of Douglas Elliman said.) But now, the reductions have trickled all the way down to studios for rent.

"The day of the $1,300 studio is back," said Stan Ponte, downtown rental manager for Stribling & Associates. A year ago, such one-room apartments were edging up to $2,000 and in special cases beyond. That does not mean that every studio for rent in Manhattan is $1,300, but rather that the first have been spotted, like swallows returning. "Mark my words," Mr. Segal said, "we'll see the $1,000 studio again someday."

Mr. Segal and his colleague David L. Weiss showed several studios in Chelsea. In one, at 208 West 23rd Street, Mr. Weiss was quick to acknowledge the apartment's small size even for a studio and its ragged condition. "Would you let your daughter live here?" he asked. "I'm not sure I would."

Whatever its condition, it is on the neighborhood's main thoroughfare, just a few doors from the Chelsea Hotel, and it is quiet. And it's $1,360.

In Chelsea, the agents said, $1,300 studios are starting to appear in older tenements. In a West 31st Street building, an impressive seven-room penthouse with three bedrooms and a terrace view that seems to put the Empire State Building in your lap has been reduced to $4,250 from $4,620. For all the apartment's charms, the building does have its drawbacks: the lobby is lined with brownish mock stones made of plaster, and on a recent visit a uniformed guard was chewing on a hamburger at the concierge desk.

Like Chelsea, the West 40's and 50's have had a boom in rental-apartment construction in the last five years, partly because land was relatively cheap there and partly because developers gambled that the area, which is west of Times Square, would become the next hot place to live.

But the far eastern edge of the district has not caught on, and some agents wonder aloud whether too many rental towers have been built. Daniel Brodsky, president of the Brodsky Organization, one of Manhattan's biggest developers, said he is bringing rents down in his newest buildings "in the high 30's, mid-40's and mid-50's" anywhere that rents had reached levels that seem unrealistic now. And he is not the only one. "People are price-conscious now," he said, "and there's a lot of competition."

On the far side of town, in the east 40's near the United Nations, rents are also dropping. Last year, one-bedroom apartments in the Churchill, a tower at Second Avenue and 40th Street with doormen and a swimming pool, rented for $2,800. Equivalent apartments now go for $2,400. For years, agents considered this a "fringe" neighborhood, a long way from the subway and without a major park for walking the dog. But faced with a soaring rental market, developers bought into this area, too.

Brokers say there are discounts even on Fifth and Park Avenues, but they are rare. The real deals on the Upper East Side are in the post-World War II buildings east of Third Avenue. For example, a one-bedroom apartment at Third Avenue and 70th Street can be had for $1,275 a month, and Douglas Hochlerin, an independent broker, showed a distinctly unrenovated two-bedroom in a tenement on York Avenue near 76th Street for $1,600, just reduced from $2,099.

Brokers say that rents have held up in the prime stretch of the Upper West Side from the 70's to the 90's. But Brian G. Edwards, executive director of leasing at Halstead/ Feathered Nest, said that in a pocket between West 97th and West 110th Streets, from the Hudson River to Central Park West, rents in some buildings have dropped at least 30 percent from a year ago.

To rent them, landlords are spiffing up. In a well-maintained classic building at 207-211 West 106th Street, John Wasserman, the rentals listing manager at Halstead, showed a newly renovated one-bedroom with herringbone oak floors trimmed in ebony. The landlord had the walls skimmed with plaster and added new door moldings and baseboards. (Even the halls outside the door are stunning, with black and white tiled floors, white marble stairs and trim painted a deep red.) The rent is $2,200.

Just as there are pockets where rents are particularly low, there are some where rents have remained steady. While they are still strong in the heart of the Upper West Side, they are, perhaps more surprisingly, holding up on Avenues A through C "Alphabet City" in the East Village. In that section, agents say, the rents haven't gone down because the area was already perceived to be an enclave of bargains because of its scrappy, bohemian character. Bottom-feeders are now heading there in droves, keeping rents at or near the levels of a year ago.

Manhattan brokers and developers say they will be satisfied as long as the apartments keep renting even if for less. But many apartments are staying emptier longer than in the last five years, and landlords are doing what they can to fill them up.

"The landlords are saying let's make a deal," said Ms. Aboud of Bellmarc. "For crying out loud, this is the time to rent."