It may soon be cheaper to rent high-end units in places like New York City and San Francisco. Apartment rents in these popular cities will need to decrease by as much as 15 per cent to reduce the backlog of empty units currently found at high-end developments, according to experts who spoke to Bloomberg.
“We built a lot of new product at the high end, anticipating incomes that don’t exist in the market now,” says Richard LeFrak, Chairman and Chief Executive Officer of the LeFrak Organization, to the news agency. “We need more affordable product in the market. There’s a huge demand at that price point.”
Landlords in New York City have already been forced to give in as renters there were able to leverage the flood of new buildings coming onto the market by negotiating concessions and price cuts. For the first time in 4 years, Manhattan apartments rents fell for all sizes in March, reports Bloomberg. This across-the-board decline saw desperate property owners compromised with tenants in order to prevent their units from going empty.
Asking rents in February dropped on average of 3.3 per cent as landlords took steps to retain and draw in new renters. This figure is an increase from a year earlier when rents only dropped by 2.5 per cent, according to appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate. And that is just a start. Countless New York City landlords needed to make concessions such as a rent-free month or payment of broker’s fees to stay competitive. These perks were offered on 26 per cent of all new leases last month, a near record number.
Currently in large cities, there is a significant shortage of affordable housing and this is something that must addressed, says LeFrak, billionaire real estate investor. The LeFrak family business is best known for building an apartment complex in the New York district of Queens that bears their name.
Image: 42nd street near Times Square in New York City.
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