Most renters in New York City do not compare rent per square foot when looking for a new apartment because it is difficult for them to know what rent is typical here.
So it may be a bit surprising that the average rent per square foot for apartments rented in Manhattan in July was the second highest ever ($85.03), while at the same time the average size of a newly rented apartment fell for the 11th time this year, according to the latest edition of the Elliman report. Rental apartments in Brooklyn and Queens saw similar declines.
In short, “renters are effectively paying more for smaller apartments,” said Jonathan Miller, president and CEO of appraisal firm Miller Samuel and author of the report.
It’s not much of a relief for renters, but median rents have been falling in recent months (average rents are skewed by outliers like ultra-luxury apartments). The median rent in Manhattan was $4,300 in July, down 2.3 percent from a year ago — and just $100 shy of that all-time record. The median rent has also remained unchanged since June.
The number of leases signed increased by 54.3 percent compared to July 2023, while the number of listings increased by 44.1 percent.
Miller said there are signs rents are peaking as inventory continues to rise and bidding wars are in play with fewer new leases. They still account for about 21 percent of new leases, compared to 24 percent last month.
With the rate cut looming, some pressure on New York’s rental market will ease as renters who have been putting off buying look for financing to finally snap up a home. In fact, mortgage rates are already falling, even though the Federal Reserve hasn’t cut rates.
Focus on the square footage before the pandemic
Apartments aren’t actually getting smaller, nor are renters cramming into a one-bedroom apartment instead of a two-bedroom one. Instead, we’re seeing a return to normalcy as renters return to pre-pandemic living space, Miller explained.
What happened in New York’s rental market after the pandemic was an anomaly, not what’s happening now. Back then, the average square footage for new leases increased as renters found bargains and realized they could stretch their budgets for larger apartments.
Now, the average square footage for new leases is stabilizing again. The average square footage for a Manhattan apartment rented last month was 945, down 9.5 percent from a year ago, when it was 1,034. So apartments are smaller, but not dramatically. That becomes clearer when you look at the decade average, Miller says. The average square footage for an apartment rented in July of the last decade was 931—so newly rented apartments are not drastically smaller.
But there’s another factor limiting apartment size: Average apartment size is distorted by new construction, which is generally smaller than existing rental units. The impact was most noticeable in Manhattan, where the average square footage for new construction apartments was 992 in July, down 25.8 percent from a year ago.
A game of musical chairs
Why were there so many new listings in July? According to Gary Mallin, COO at Corcoran, which also released July rental market reports for Manhattan and Brooklyn, it has to do with expiring leases.
Malin explained that “some landlords are structuring their existing leases to expire during the season to take advantage of increased demand.”
The increase in listings also means that those looking for housing “have a wider choice,” he said.
Increase in lease signings in Brooklyn
In Brooklyn, new leases rose to 4,477, the highest ever last month, up 300.8 percent from July 2023, when 1,117 tenants signed new leases. New leases rose 92.9 percent to the second-highest level for July, according to the Elliman report.
Median rent in Brooklyn fell 9 percent year-over-year to $3,563, as the average size of a rental apartment fell for the tenth consecutive month and the average rent per square foot rose 2 percent to $56.71.
The average living space of an apartment rented in Brooklyn in July was 969 square feet, a decrease of 7.3 percent from a year ago, the report said.
The average size of new construction projects was 78.4 square meters, while the size of existing rental properties was 91.4 square meters.
New offers are rising in Queens
In the Northwest Queens region covered by the report, new leases rose to 945, also the highest ever, and up 419.2 percent from July 2023, when 182 renters signed new leases. Listings reached their second highest level in July, rising 179.8 percent.
The median rent fell 5.2 percent year-over-year to $3,450, and the average rent fell for the first time in four months. The average rent per square foot rose 1.2 percent to $56.07.
The average square footage for a July rental apartment in Queens was 811, down 14.5 percent from a year ago. The average square footage for new construction was 725, compared to 825 for existing rental apartments.
