Company president Nancy Packes says other rental reports have "noted lesser declines in rent, but only measured the drop from Q4 2008, which the Packes report says was well after prices had begun to decline in a number of Manhattan neighborhoods.
"The first major point is that the decline didn't begin just a year ago, some regions started to fall earlier than that," Packes tells GlobeSt.com. Secondly, "some areas fare better than others, depending on the how much competition there is from rental buildings in a given area," she adds.
The barometric numbers in Packe's report say studios in full service buildings that were renting for $2,400 are now being priced at $1,900 while one bedrooms approaching $3,000 are now $2,500. Two bedrooms, once peaking at $5,000, are down to $4,000.
And, she says they will probably continue to fall. She points out that by the end of May 2009, the New York City Office of Management and Budget had reported 103,000 private sector job losses with 32,000 of those in the financial sector. "But, with just half the anticipated job losses in financial services realized to date, it could be possible [that] the rental market will drop further," says Packes.
Packes, also president at Brown Harris Stevens Project Marketing, says her report sets the framework of an analysis, to prepare owners in particular for the possibility that all the job losses are not in. Speaking to "neighborhood as a function of the rental market," Packes says when an area is prized for its residential character, it traditionally caters to condo buildings as opposed to rental.
The report says that renters are well informed by media reports and their own research. As a result, even residents who renew their leases get lower rent premiums. Historically, renewal rents have averaged about 5% to 10% above re-rental rents, but the report says that's declining.
"Owners need to be realistic in setting prices, much quicker to respond to market pressures and much faster on the learning curve," she says. Ultimately, she says, "we see a possible further decline of around 5% to 6% in Manhattan rental market pricing and, after job losses abate in mid-2010, a leveling off of prices for around two years until new rental supply is absorbed and the job market rebounds."
For now, Packes says that despite a stable summer impacted by some new summer hiring, owners need to recognize the market is still in a state of flux, that the larger picture says the financial services market is not done contracting.
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