To lure renters, landlords cut costs, fees, add gift cards amid pandemic, analysts say (2024)

Developer Robert Leaf of New Rochelle isattractingrenters tohis six-storyluxury apartment building that boastsa fireside lounge, club roomandfitness center.

But he included some incentives. The Millennia, abuilding near the New Rochelle Metro-North Railroadtrain station, is offering one month of free rent for studios and one-bedroom apartmentswithout terraces.

Terraced apartments sold out first.Only studio and one-bedroom apartments were left.

Leaf is part ofa growing number of developers and landlords in Westchester whoare givingconcessions such as gift cards, feewaivers and months offrent to lure people as vacancy climbs in parts of New York City and the metropolitan area.

"It's truly a rentersmarket because the amount of people looking to relocate within the city is very slim," said Victor Rodriguez of real estate analytics firm CoStar.

Analysts say that from March to October, the bruntof the pandemicpushed some renters to flee New York City, move away, ornot to renewleases asconstruction wrapped up on a number of projects in the region.

The overall increases in supply and concurrentdrop in demand led to a growth invacancythatpropelledlandlords to negotiate rentconcessions more frequently, according to analysts.

CoStar saysthe number of landlords offering rent concessions hasdoubled since December.The tactic appears to be yielding resultsasthe speed at whichapartments are rentedin Westchesterreturned to itspre-pandemic levels in August.

The coming months will see a delicate balance of continued givebacks whilewatching demand and lease closings, Rodriguez said.

"Over the next six or so months, the expectation is that rents will drop (in Westchester)as renter demand lessens,"Rodriguezsaid."Perhaps it will bea scenario where (rents)stay stable and the amount of concessions offered increases, but typically, both have to work together to spur demand." CoStarreported landlords in the metropolitan area, on average, offered the deepestdiscounts in rent inSeptember and July.

Tanya Gonzalez, 42, from New York City, saidmovingto RiverTides at Greystone in Yonkers, and moving during the pandemic in general, isultimately a question of mental health and comfort.

Gonzalez lived her entire life in New York City before moving to a one-bedroom with a terrace atRiver Tideson Oct.16. Management at the apartment complex granted one month of free rent to her and her husband, she said, andfee vouchers wereoffered to Gonzalez because of her role as a teacher andessential worker.

"I didn't take (rent concessions)into consideration until we were done with the paperwork,"Gonzalez told The Journal News/lohud.

Despite not having any furniture at her new rentalon Warburton Avenue until December,Gonzalez saidthe personal healthbenefits of living and working from a biggerapartment in a less crowded city outweighanytemporarydiscomfort.

"I wanted to have a different work environment since I've been working from home since March and I am going on maternity leave until March 2021."

Over the summer, David Robeano and his husband were shocked when they were sent rent increases for their duplex at the Apex Hudson Riverfront in Yonkers, particularly because they were good renters and had seen similar apartments in the development advertised for cheaper.

They were faced with a difficult choice: stay and pay more rent on a lower income because of the coronavirus, or move.

“So it was pretty scary at the time,” Robeano said.“The idea that we're going to have to move or that we're going to have to pay another $350 a month was pretty overwhelming.”

The couple had seen other Yonkers apartment complexes offering huge concessions but the idea of moving amid the pandemic was too much for them. Instead, they lobbied the building manager to not increasetheir rent on the apartment that they’ve been in for more than two years after moving from Manhattan.

Eventually, the couple received the concession and Robeano suggested to other renters to always negotiate.

How will developers respond?

RXR Realty,the developer behind luxury apartmentsatSawyer Place in Yonkersand360 Huguenot in New Rochelle, saw leasing across its rental portfolio in the metropolitan area slow by 60% in March and April.

The development firmleaseda third of its buildings from March to September. Andalthough it isnot giving additional incentivesbecause of the pandemic, many of its websites show concessions that developers would be less eager to grant prior to the pandemic.

360 Huguenot's website showed incentives of up to two months of free rent for some leases. Sawyer Place's boasted of three months of freerent for some leases.

Avalon Yonkers advertised rates that included up to one month free on lease terms 12 months or longer—and up to two additional months of free rent on select apartments.

The luxury apartment complex at 50 LeCount Place in New Rochelle, known as The Standard,offers to waive amenity fees for one year and to grant one month of free rent tonew renters.

Bruce Berg of the Capelli Organization, the developer of the property,saidThe Standard opened in February and has offered to waive the amenity fee and a month of free rent to remain competitive as the broader rental market reacts to changing seasons and the coronavirus pandemic.

"We want people to get into the building andenjoy," he said. "We can pick up the amenity feenext year."

Real estate firm Ginsburg Development Companies,the owner of several apartment buildings in Westchester, includingStratus on Hudson and River Tides at Greystone in Yonkers,is advertising one month free rent on a one-year lease and two months free on a two-year lease for new residents at some of its apartments.

River Tides at Greystone’s site showed 0.5month, one month or 1.5 months off of rent depending on the lease term, from a year to 3 years.

Martin Ginsburg, founder and principal of GDC, said that the number of people moving from New York City to GDC’s Westchester properties has increased amid the pandemic but that the company isn’t offering any particular concessions to lure them.

If a property sees a reduction of below 95%, that property may see some concessions, Ginsburg said, noting that GDC’s occupancy is generally high and that people are showing a preference for smaller luxury apartments.

Ginsburg noted that the rental market dependslargely on what happens with the coronavirus pandemic. If it persistsanother year or two, and people are staying underemployed, then rents will come down and there will bea recession, he said.

He does not think that will happen, believing that there will be a quick recovery once a safe vaccine is created.

Rental rates dip

As New York reeled from the coronavirus pandemic, rental markets in the county seat of White Plains and Yonkers, the largest city in Westchester, each saw some dips in year-over-year monthly rental rates, according to data from Zillow that goes through September.

Of the two, White Plains saw the most months of reduction, with its largest dip of 3.2% in July. Yonkers’ largest drop in that analysis was in May when the city saw a decline of 0.7%, or to around $2,100.

Comparatively, New Rochelle saw gains in most months in 2020, but they were generally not as large as last year’s, Zillow reports.

Alexandra Lee, Zillow economist,posited that concessions could be muting the observable rental weakening in these markets, noting that Zillow’s rental index wouldn’t price in incentives such as free months of rent or waived security deposits.

“In fact, concessions are a tactic landlords can use to avoid officially cutting rents and setting a precedent that could linger when the market picks back up,” Lee said. “In this way, concessions can be a leading indicator of a coming price drop — landlords will offer them first, and may only reduce rent after these concessions no longer seem to move the needle.”

On the other hand, the redevelopment of the office complexat 70 Ashburton Lane in Yonkersinto studios and one-bedroom apartments, known as Hudson Blue, was fully leasedfour months after it opened in April.

Norent concessions and no pre-leasing was done prior to the apartment building opening in April, the project's ownership said.

It's not just Westchester

Apartment vacancy in New York City, the Jersey City waterfront and southern Westchester, a market of roughly 1.4 million market-rate rentals, was at2.2% in January, according to CoStar.

ByOctober, vacancy in the region almost doubled to 4.2% — an increase of roughly 28,000 new vacanciesin six months.

Rodriguez of CoStar saidthe last time the vacancy stood above 3.3% was in 2011.

"Markets with a lot of construction are dropping their rents and that's also leading to increased concessions," he said.

Asking rents for market-rate apartmentsin Manhattan and Brooklyn, the priciest submarkets in the region, have decreased through the duration of the pandemicasrenters continuedto exit the market.

Real estate firm Douglas Elliman saidthe market share of landlord concessions in Manhattan, Brooklyn and Queens rentalsreached a record for the decade in the third quarter of 2020.

The number ofapartments available for rentin Manhattan, Brooklyn and Queenstripled from one year ago, the firm said.

Nationwide, the year-over-year rent growth rate has dipped by an average of 1.4%, according toApartment List. The stateaverage dipped by 7%.

Everyone can't offer or receive concessions

Although new, luxury developments are able to dole out concessions, for more mom-and-pop landlords and those who live in residencesdon’t typically get or receive those incentives.

In Yonkers, for instance, at least a third of renters live in smaller buildings that in turn tend to be owned by smaller-scale landlords who are less able toweather long periods of non-payment, according to the NYU Furman Center.

Around 40% of Yonkers households are in the severe rent burden category, leaving them more susceptible to housing instability resulting from income loss because of the pandemic.

Craig Scher of CS Realty & Relocation Services represents a number of smaller landlords in the Sound Shore area. Scher saidthat he hasn’t seen concessions from them.

But Scher said he isseeing a 27% increase in the rentals of $5,000 and over from April to September. During that same period, he said that lower-income households, thosemaking less than $100,000, saw an 18% decrease.

“So, what I am saying is the more fortunate are able to move, and the less fortunate are struggling,” he said. “We are seeing more properties in the lower price range stay on the market longer,have a tougher time securing a qualified tenant.”

On the lower end, he said, people want to move but they just don’t have the money.

Looking ahead in Westchester

Mark Lehman of New York City real estate firm Rosewalk Propertiessaidnow might be the best time to build near PaceLaw School inWhite Plains.

Unlike buyers from New York Cityseeking isolation and refuge as far north as the Adirondacks, pandemic renters are moving, but they are mostly staying near the city.

In White Plains, rents are down by around 6% compared with the same time last year, according toApartment List'sNovember rent report.

But there might be a glimmer of hope in White Plainsas rental prices haveincreased 0.5% over the past month,according to that analysis.

Lehman saidhe is hoping that trend will continueas he eyes being the third developer attempting to erectapartmentsa short walk from Pace Law School at108 North Kensico Ave. The first developertried around 20years ago.

Lehman manages rental buildingsin Westchester, Dutchess and Putnam counties, and saidthat despitebuyers flockingnorth of New York City, most renters have stayed put.

"Renters in New York City aren't venturing up to the Hudson Valley as much as the immediate suburbs," Lehman told The Journal News/lohud.

Lee of Zillow underscored that, sayingthe higher vacancy rate and rental price drops in New York City, compared with the relatively strong rent growth in Yonkers andNew Rochelle,stresses how much renting preferences have changed during this pandemic.

"Renters are no longer willing to pay high rents to live in cramped quarters," she said. "For the many renters that are now able to work remotely, these areas in Westchester represent a great option that is still accessible to the city, yet allows for more space and cheaper rents."

Future of New Rochelle

Luiz Aragon of New Rochellesaidrenters are still moving to New Rochelle, which has approved over 6,000 rentals across 32 projects in recent years. Penning leases in the second quarter of 2020 was difficult because of statewide restrictions he said, but leasing velocities have mostly recovered to pre-pandemic levels.

Five projects are penning leases while 11 are under construction.

Aragon, the commissioner of development for the city, saidNew Rochelle's recent success luring in apartment construction is making the administrationconsider granting entitlements for up to 10,000 apartments downtown.

If approved, the plan would almostdouble thenumber of apartments originally approved in December 2015 — 5,500 —when the city voted to rezone the downtown. In exchange, downtown New Rochelle would see less medical office space construction, according to Aragon.

Tiffany Cusaac-Smith covers Yonkers, the fourth-largest city in New York.Follow her on Twitter @T_Cusaac. Mario Marroquin covers real estate and economic development. Click here to see his latest stories. He can be reached at mmarroquin@gannett.com or @mars3vega