By Adam Frisch, Managing Principal, Lee & Associates Residential NYC
Recently, I leased a stunning townhouse in Greenwich Village that by all accounts would fall under the category of super-luxury. Along the way, I learned a few lessons regarding how today’s sales and rentals are connected and how landlords can best navigate these ever-shifting markets. This particular townhouse is located in the heart of Greenwich Village and the tenant is paying ten percent less than the previous tenant. In addition, the landlord paid the broker fee as opposed to the tenant. These factors serve to illustrate a larger trend within the world of high-end rentals in New York City: the luxury rental market is not what it used to be.
High-end rentals in the city are generally divided into two categories: middle-luxury which is comprised of units that rent for between $4,000 and $8,000 per month and super-luxury which is comprised of units that rent for more than $8,000 per month. Super-luxury rentals and sales markets in New York City are intricately connected in that these rentals are often used solely as places to stay when one has sold their apartment and is in the process of buying another. Therefore, when the sales market is slow there is less of a need for the “in-between” places offered by the super-luxury rental market. This differentiates New York City from virtually every other city in the country wherein a booming sales market signifies a decrease in rentals.
Currently, both the middle-luxury and super-luxury markets are struggling but middle-luxury has been hit especially hard as is always the case when there is uncertainty in the market. Buying an apartment is significantly riskier for residents of middle-luxury units than those of super-luxury ones. My prediction is that both luxury markets will recover within the next year and my advice for landlords would be to continue offering concessions such as a free month’s rent that will allow them to rent as many apartments as possible in the current leasing climate.