NEW YORK CITY-The pace of job creation in the five boroughs has eased from one year ago, but the rental housing market remains healthy, according to a new report from Marcus & Millichap Research Services. Strong demand drivers will persist through year-end, while supply growth also will accelerate. With employment rising and other economic indicators providing encouragement to builders, the city is in the midst of a development cycle. Groups will continue to push projects through the approval process as 2013 winds down in advance of a change in the mayor’s office in 2014. In the boroughs, development is booming in Queens, especially in Long Island City, a location that offers residents a relatively short subway ride to Midtown Manhattan employers.
More specifically, the company predicts, developers will bring online approximately 7,000 rentals online in the five boroughs this year, an increase from more than 5,000 units last year. The building cycle will continue, as more than 15,000 units of multifamily housing are on track to receive permits this year. Meanwhile, the vacancy rate in the New York metropolitan area will rise 10 basis points to 2.6%; a decrease of 10 basis points was recorded last year. Average rents will rise by 2.5% in 2013 to $3,455 per month. A staggering gain of 11.5% was registered during 2012.
In terms of multifamily construction, Marcus & Millichap states, multifamily permit issuance was on track to increase 50% this year to more than 15,000 units. Based on projections, nearly 3,500 units of for-sale and rental housing will be authorized in Manhattan and more than 5,000 permits will be issued in Brooklyn.
More than 4,000 units are under construction and slated for delivery in the next several months, including multiple projects in Long Island City. The 1,240-unit Gotham West in Midtown West is also progressing toward completion.
And solid job growth is supporting a tight apartment market in Manhattan. While vacancy ticked up 30 basis points in the third quarter to 1.7 percent, the rate is 20 basis points less than one year ago.
In terms of average rents in Manhattan, they hit $4,068 per month in the third quarter, or 3.1% more than one year earlier. In the preceding 12-month span, average rents in the borough advanced 1.9%. Property operators in Manhattan were collecting an average of $5.42 per square foot in rent for properties built since 2000, a slight gain from one year ago. In the borough’s oldest buildings, rents were $4.40 per square foot, representing an increase of 4.4% from one year ago. In Brooklyn, at $3,281 per month in the third quarter, the average rent is nearly 20% less than the level in Manhattan and will continue to attract cost-conscious renters. The average rent in Brooklyn advanced 2.5% during the third quarter.
Meanwhile, Marcus & Millichap is forecasting a continuous flow of debt and equity capital into the multifamily sector, supporting a healthy volume of transactions in the months ahead.