Landlords of residential apartment buildings across New York City’s five boroughs are offering “friends and family discounts” to incentivize prospective tenants to sign a one- or two-year lease.
During the early days of the pandemic, it was impossible for a tenant to personally visit an apartment. With in-personal tours and open houses cancelled, renters were forced to rely on listing photos and, where possible, 3-D video tours to experience a new place before they sign the lease.
Unfortunately, the COVID-19 lockdown has resulted in fewer individuals personally visiting an apartment prior to signing the lease. To quote Ofer Yardeni, Chairman and CEO of Stonehenge NYC, the owner/manager of approximately 3,000 apartments in Manhattan and Long Island City, “The issue today is ’traffic.’ We need people to come back to the city, it’s never about rent, the demand is not there yet.”
To further complicate the renting of apartments, many prospective tenants in New York City and across the nation are facing economic uncertainty on their ability to meet the financial obligations of renting an apartment.
Stephen G. Kliegerman, President of Brown Harris Stevens Development Marketing said, “The rental market has experienced an unprecedented dilemma as a result of COVID-19 creating an opportunity for tenants never before seen in the modern-day New York City rental market. Due to the lack of influx of students, first year associates and foreign visitors, landlords are competing for mostly local tenants all shopping for the best possible deal to upgrade their living situation. Incentives such as free parking for a year, no or a very low security deposit, 2–5 months free rent, Uber gift cards, free cleaning services and broker commission incentives are putting landlords in a highly competitive rental market that will continue for the foreseeable future until all of those tenants return to our city.”
Nationwide, landlords are increasingly willing to offer concessions or perks to potential tenants rather than lower rents as the pandemic impacts the rental market, a new Zillow study found.
The survey of Zillow listings showed that 30.4% of rental listings on the service featured concessions, compared to 16.2% of listings in February and 12.5% last July.
“Before the pandemic, the nation was seeing concessions dwindle earlier this year, which coincided with accelerating rent growth. That trend reversed sharply after the pandemic hit in February,” Zillow Group economist Joshua Clark wrote. “In a softer rental market, landlords are trying to push the right button to bring renters into their space.”
Free rent — at a median amount of six weeks — is the most common concession, comprising more than 90% of the deals offered in the U.S. Reduced or waived deposits make up 9.1% of the concessions, while gift cards come in at 6.6%.
“The increase in concessions is likely to be most prevalent in the multifamily buildings common in urban cores, which is consistent with previous Zillow research showing urban rents have been hit harder than rent in the suburbs during the pandemic,” Clark wrote.
In the New York metro area, for example, July rents are down by 2.6% compared to last year. Concessions jumped to 14.9% in April compared to 8.8% in February, but fell again in July to 13.8%.
Major Incentives currently being offered to a prospective tenant to rent in New York City include a variety of incentives. In a study prepared by Brown Harris Stevens Development Marketing include:
- 1 Year free parking
- 2-3 Months free rent on a 1-year lease
- 2 Months free rent in the second year of a 2-year lease so total of five months. In certain instances, up to six months have been seen; however, this is not a trend
- 1 Month OP (owner pays commission) to broker plus $2,000 Amex gift card
- Landlord to pay moving expenses for tenants moving within NYC (any borough)
- Free Amenities — valued at between $75 and $150 per month
- Uber gift card up to $500
- Zero security deposit
- Sight unseen lease satisfaction guarantee — if they rent sight unseen and sign a lease, and then come to see the unit and do not like it, they can cancel.
- 1 Free apartment cleaning a month
- Buy one, get one free amenity fee incentive
Zillow reported that the number one ranking of rental concession types across the U.S. is free rent representing 90.8% share, followed by waived or reduced rental deposit of 9.1%.
Industry leaders’ concessions will continue until the inventory of vacant apartments turns the corner.