The booming market for luxury rentals in Manhattan has led to a new market segment: the $100,000-a-month rental.
Demand for ultra-luxury rentals is soaring in Manhattan as more wealthy buyers decide to sit on the sidelines and rent. At the same time, more sellers of trophy penthouses and pricey townhouses are opting to rent to cover their monthly costs rather than letting their properties languish on the market.
"There has been a large shift towards rental from purchase at the high end," said Jonathan Miller, CEO of Miller Samuel, the appraisal firm.
Nationally, rents have been strong or climbing because potential buyers can't afford to buy.
In the Manhattan luxury rental market, the wealthy can afford to buy but don't want to make such a big purchase with so much uncertainty hanging over the real estate market. A new mansion tax, the cap on state and local tax deductions, renewed talk of a pied-a-terre tax and an oversupply of luxury apartments have led to falling prices and sales in Manhattan for two years. As a result, the luxury rental market is thriving, with rising prices and demand, while luxury sales are declining.
Median prices for luxury sales — defined as the top 10% of the market — are down 10% for the year, according to Miller Samuel. But median prices for luxury rents are up 4%. The higher you go in the rental market, the stronger the pricing — median prices for "trophy rentals" at the top 1% are up 17%.
The growth is a big turnaround for high-end rentals, which have traditionally followed in lock-step with the luxury sales market.
"If you look back, these two markets moved in tandem," Miller said. "But that changed this year."
Prices for high-end rentals have reached new highs. A condo at 15 Central Park West rented for $125,000 a month in April, according to Miller. Two other properties on the Upper East Side rented for $85,000 a month, while at least a half-dozen others have rented for more than $75,000 a month.
One of the most glamorous luxe rentals on the market is the penthouse at 56 Leonard St. in Tribeca – a shimmering new glass condo tower often referred to as "The Jenga Building" for its stacked-block, off-center design. The 6,000-square-foot pad, 56 stories up, has 14-foot ceilings and soaring windows overlooking all of lower Manhattan and the rivers. It's got six bedrooms, 4½ baths and an art collection of old European master works that totals tens of millions of dollars.
Timothy Melzer, the broker representing the rental, said many of today's wealthy want to test out an apartment before buying.
"Sometimes people want to try out a neighborhood or see if it's a building they like," he said.
The penthouse was purchased by a group of investors in 2016 for just under $30 million. Melzer said the investors spent millions renovating and designing the apartment as a rental, rather than for sale.
"We could see that there was a demand for this type of product, that really didn't exist," he said.
Beyond the rent, which tops $1.4 million a year, renters would need about $500,000 in deposits, first month's rent and broker commissions before even moving in.
While he said he's had several wealthy prospects tour the apartment — from hedge funders to Hong Kong businesspeople — no one has yet to rent the property for next year. And the owners refuse to rent it for just a month or two.
"It's got to be for a year," he said. "It's a great value."