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Thread: Manhattan rents fall

  1. #1

    Default Manhattan rents fall

    New York Times

    December 20, 2001

    As Economy Slumps, Even Manhattan Rents Fall

    Rents on thousands of apartments in Manhattan have tumbled in the last few months as the economy has worsened and fallout from the terrorist attack has spread beyond Lower Manhattan.

    Rent reductions in the World Trade Center area have been widespread and deep since the attack on Sept. 11, as tenants have fled. But what is surprising now is how deep the rent cuts are in other neighborhoods of Manhattan.

    Brian Edwards, director of rentals at Halstead/Feathered Nest, one of the city's biggest rental brokerages, said that half the rental properties coming on the market now above Houston Street that are unregulated have been marked down. Unregulated properties above Houston and below 96th Street are now renting for an average of 18 percent less than they were a year ago, Mr. Edwards said.

    These unregulated apartments, for which rents are not set by law, make up about a fifth of the total number of rentals in Manhattan, analysts say, but the trend of reductions carries over to rent-regulated apartments on a smaller scale. Low-income, subsidized housing is not affected.

    Although this is traditionally a slow time for rentals, brokers, apartment hunters and landlord representatives seemed to agree that negotiation over the price is more common today than it has been in almost a decade, and that new opportunities exist for those who are looking for apartments in Manhattan.

    "Some rents are off 30 percent in Battery Park," said Mr. Edwards, referring to a neighborhood abutting the World Trade Center site. "The Upper West Side is 15 percent off. The Upper East Side is 15 to 20 percent."

    While most of the cuts have been in the asking rents for vacant, unregulated apartments, landlords have also begun to reduce prices in hundreds of rent-stabilized apartments, both for new leases and in occupied apartments as tenants threaten to leave, rewriting leases at lower prices and granting free months of rent, said Joseph Strasburg, president of the Rent Stabilization Association, a group that represents landlords. Many but not all of these are in the financial district, near ground zero. But throughout Manhattan, Mr. Strasburg said, landlords are finding that they need more tenants to fill their spaces.

    After years of dictating take-it-or- leave-it terms in a skyrocketing rental market, landlords are now being forced to negotiate one-on-one with their tenants and are agreeing to monthly rent reductions and upgrades to bigger or more desirable apartments in the same building, for the same money. Landlords are also advertising anywhere from one to three months "free" rent, effective discounts of 9 to 27 percent. But in many cases, the landlords are refusing to write more than a one-year lease at the new lowered prices, hedging their bets that prices will rise again in a year.

    The apartments affected span a broad range of neighborhoods and prices, from an $1,800 studio on East Eighth Street (now $1,450) to a four- bedroom $14,000 high-rise rental off Riverside Drive (now $8,900.)

    The neighborhoods that have been affected the least, brokers said, are the so-called blue-chip neighborhoods: Central Park West, Park Avenue and Fifth Avenue, but there have been scattered rent reductions even there.

    R. Kenyatta Punter, of the Central Harlem agency that bears his name, said rents on renovated brownstone apartments in Harlem had retreated to where they were two and a half years ago. "A two-bedroom that a year ago was $2,400 to $2,500 has dropped back down to the $1,800-to- $2,000 range," he explained.

    In Washington Heights, also in upper Manhattan, rents have fallen slightly less than 10 percent, said Gus Perry, of Stein-Perry Real Estate. A one-bedroom apartment there now goes for $1,200, compared with $1,300 a year ago. The reason for the relative stability? "We're much cheaper here to begin with," Mr. Perry said.
    Brokers attributed the rent markdowns primarily to the recession, with its job layoffs and fear of overspending, worsened by the construction boom of the last five years, which created thousands of new apartments.

    "Clearly a lot of rentals are on the market now, in new buildings," said Paul Purcell, the president of Insignia Douglas Elliman, the city's largest real estate company. "And a lot are still trickling in."

    Brokers, including Mr. Purcell, said that the diminishing pool of newcomers often prefer to buy rather than rent, taking advantage of lower interest rates.

    After all, Manhattan rents still remain high; although apartments may have dropped, an entry-level, no-frills one bedroom can easily hit $2,000 a month. Two years ago, that was the going rate for a studio, said Stan Ponte, who handles downtown rentals for Stribling and Associates. "But a rare, beautifully finished, high-end one bedroom still go into the $4,000's and do," he said.

    Scott Durkin, the chief operating officer of the Corcoran Group, predicted more drops in rents.

    Mr. Durkin and his roommate got the rent on their own SoHo loft reduced in October by $500 when "we saw the same type of loft advertised for $500 to $700 less than we were paying," he said. Mr. Durkin, like many others, threatened to break his lease. When had he moved in? Only last May. That represented about an 11 percent cut, he said.
    David Lowenfeld, an executive at World-Wide Holdings Corporation, which owns four buildings in Lower Manhattan, said he had received dozens of calls from tenants asking to break their leases or lower rents. Yesterday, Mr. Lowenfeld said that he let any tenant out of his lease who demanded it, and reduced rents of tenants who agreed to stay by 10 to 20 percent.

    In Battery Park City, Julie Gaines, 38, and her husband, David Lenovitz, 42, were living with their two children in an 1,100-square-foot apartment when their landlord, Milford Management, sent out notices offering every tenant a 25 percent rent drop if they would stay at least until their leases were up.

    Nevertheless, Ms. Gaines said, a lot of renters left. "We know several couples who moved to their summer homes" in the Hamptons and New Jersey, she said. Yet even with the drop in rents, some Battery Park apartments are still standing empty.
    But Mr. Lenovitz and Ms. Gaines, who own Fishs Eddy, a domestics shop on Broadway at 19th Street, had another strategy. They offered to keep paying their old rent, $5,500, if they could move their family into a 1,900-square-foot apartment in Liberty Terrace, a neighboring high-rise owned by the same developers. That would give them almost double the space, for the same rent. The landlord quickly agreed. They moved 10 days ago.
    Some developers and brokers said they believed that the rents have indeed hit bottom. But Bob Esnard, the president of the Zucker Organization, disagreed. "It's not like '93, when we hit the bottom of the barrel," he said. "We haven't gotten there yet." That year is generally considered the nadir of the last real estate recession.
    Steven Schleider, a real estate analyst who helps prepares the statistics for the Real Estate Board of New York, dismissed doom-and-gloom predictions that rents were in free fall.

    Some new leases may be 15 percent less, he said, but he continued, the white-hot market of a year ago was "hyperinflated." After a meteoric rise, rentals leveled and began to decline gently last January, then dropped sharply after Sept. 11. "It was a straight line, slightly tilted down, since January," said Mr. Edwards of Halstead/Feathered Nest. "After 9/11, we really got kicked, it really got rolling."

    While rents have fallen, the city's homeless population is still increasing, as the worsening economy strikes particularly hard at those at the bottom of the economic ladder. Also, the lower end of the rental market, where most of the poor live, is highly regulated and thus not affected by the new cuts in rents.

    Outside Manhattan, the softening of the rental market appears to have hit some neighborhoods harder than others. In Williamsburg, Brooklyn, Suzy Klein, owner of Klein Realty, said the rental market is "very quiet." Landlords are reducing prices of rentals about 15 percent, she said.

    In the Riverdale section of the Bronx, where demand is strong and inventory is tight, rents remain the same as a year ago.

    That's not true at 200 Riverside Boulevard, at the corner of West 70th Street, where the owner of a condominium in one of Donald J. Trump's West Side high-rise has finally rented his apartment for $8,900. The original rent for the five-bathroom, four-bedroom apartment was $14,000.

    Mr. Schleider, the analyst, predicted that rents would rise again. Until then, he suggested there may be a silver lining. The areas affected by the biggest rental reductions may become affordable for young people, who, he said, "will be able to live in Manhattan again."

  2. #2

    Default Manhattan rents fall

    This might be a good thing for the city, it will encourage buyers to come back to New York with a substancially lower price tag than previous years

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