Residential: Rents Rise But Demand May Soften

Manhattan’s apartment market remains strong with vacancy of less than 3% at large, market-rate properties and rents climbing steadily, according to a first-quarter Apartment Research Report by Marcus & Millichap. However, the report predicts a more challenging environment for rental housing in the months ahead, as aftershocks in the financial markets may lead to job cuts above and beyond what Wall Street has already experienced.

“Leveraged buyers will remain subdued in the months ahead as conditions in the credit markets stabilize,” says Edward Jordan, regional manager of the Manhattan office of Marcus & Millichap, in a prepared statement. “Well-capitalized private buyers are expected to stay active, however, as will institutions and foreign investors.”

The report notes that “no one knows for certain how Wall Street’s problems will affect demand for rental housing. For now, it is likely that housing demand will be supported by staffing increases in other employment sectors, although growth will not be as strong as in the past couple of years. As a result, vacancy will rise slightly in the quarters ahead, and rent growth will not be quite as substantial as in ’07, when asking rents advanced more than 8%.”