Rental prices in New York City could be heading lower as landlords try to get prospective tenants to sign new leases, the CEO of real estate appraiser Miller Samuel told CNBC.
"It's already in process," said Jonathan Miller. "It's happening on the renewals side," too.
Hal Gavzie, executive manager of leasing for property group Douglas Elliman, told CNBC that landlords are offering concessions, such as waiving security deposits, and they're being more flexible with renewals to try to keep people from leaving the city, which has been hit hard by the coronavirus pandemic.
The latest monthly report from Douglas Elliman and Miller Samuel showed a 71% plunge in Manhattan new leases in April from a year earlier.
Those massive declines in new leases stem from factors including quarantines that prevent people from seeing new apartments or because they have lost their jobs.
Gavzie said the environment looks like it could be similar to the financial crisis in 2008 and 2009, though he cautioned that it's too early to be sure. The vacancy rate in April climbed to its highest level in 14 years, according to the data.
The drop in new leases, however, is only part of the picture, Miller said. "In a building, about two-thirds of apartments are renewals, and a third are new leases."
"When you have a drop in new leases, you have a surge in renewals," he added. "So the action is here, but it's not public-facing. Landlords are negotiating with their tenants [and] they're maintaining occupancy."
The high number of renewals could be why, at the same time, Manhattan saw the highest rental prices ever: The average rental price in Manhattan was up over 7% from April 2019, according to Douglas Elliman-Miller Samuel data. Rental price per square foot also rose 9% to a record high of $72.02. Those rental prices are tied to the public-facing information from new leases, not the private renewals.
"Rents have been rising strongly for the past year, that's nothing new," Miller said. "What is new is that there are far fewer public-facing transactions happening right now."
"As a result, we're seeing an uptick in vacancy."
The number of open apartments in Manhattan is nearing a high, according to the report, which may be partly due to the pandemic accelerating the trend of city-dwellers fleeing for the suburbs.
The activity in suburban markets outside New York City is not yet showing an increase in movement from city, but there's been an uptick in inquiries, said Miller.
Gavzie said he's seen some relocation companies extending their employees' stay-at-home policies until September, meaning agents won't be showing apartments in person for a while.
However, he said, "I'm optimistic that once agents are able to show apartments, rental agents will be very busy." He added, "I would expect to see a decent surge in rental activity, but still well below last year's same period."