The rental squeeze

Landlords may be more apt to allow tenants to pack in, but do they need to?

Author: Vanessa Weiman, The Real Deal
Date: Thursday, October 1

The rental squeeze

Landlords may be more apt to allow tenants to pack in, but do they need to?

October 01, 2009 07:00AM

By Vanessa Weiman

 

With the combination of high building vacancy rates and the down market, Roberto Gonzalez, an agent at Bond New York, expected to see a wave of tenants erecting walls and "cramming" into apartments to save rent money.

 

But the expected flood of people seeking to pile into shares hasn't really arrived, he said. "Everything in my gut tells me there should be tons of people sharing, but there are actually fewer," said Gonzalez, who has rentals in Tribeca, the East Village and Williamsburg.

 

Brokers who deal with areas of Manhattan where there are a high percentage of shares -- such as the Financial District, Murray Hill and Union Square -- said that while landlords may be more apt to allow tripling and quadrupling up just to get an apartment full, that there hasn't been a huge surge.

 

The reasons for "why not" say a lot.

 

For one, buildings that are desperate to rent out apartments are now simply making their rents cheaper, as well as throwing in cost-saving concessions that help tenants steer clear of overcrowding. Additionally, fewer college grads are moving to New York to start jobs in finance and other industries because the job market here is so bad.

 

Gonzalez said he believes that's a big part of the reason that the surge hasn't fully aterialized.

 

Still, while it might not be widespread, the tenant squeeze is clearly more common now than it was before the downturn.

 

Ofer Yardeni, managing partner at Stonehenge Management, told The Real Deal a few months ago that because many tenants have taken in roommates to deal with the downturn, a building that once had 500 occupants may now have 700 or 800. Some have also put up walls to divide up the space. "Technically speaking they're not supposed to do that, [but] I can't control that …it happens," Yardeni noted at the time.

 

Last month, he said, "the history of New York is about sharing."

 

He noted that many of the buildings Stonehenge manages appeared fuller recently since some tenants had lost their jobs and were at home more than usual.

 

Meanwhile, Alex Karas, a sales and rental agent at Bond New York, said he recently rented a two-bedroom East Village apartment where the landlord was willing to take down and put up walls to accommodate the four people who wanted to move in.

 

The landlord also dropped the price and offered a free month's rent.

 

"He wanted to get good tenants in there ASAP," said Karas.

At 200 Water Street in Lower Manhattan, where 40 percent of the leases are shares, roommates are still doubling up, "but it's not turning into a dormitory," said Kathleen Gargan Scott, vice president of marketing and leasing for Rockrose, which manages the building.

 

She added that the building doesn't allow larger groups to rent apartments.

 

But Gargan Scott said that 200 Water has seen an uptick in a different trend: people coming from the boroughs to rent in Manhattan.

 

"People are gravitating back from Brooklyn and Queens," she said. "Fifteen percent of people currently at 200 Water relocated from the boroughs, and some even from Jersey City."

 

Marcus Medina, Urban Sanctuary's Midtown managing director, said he has also seen that trend. He said people who might previously have looked for cheaper shares in Brooklyn can now afford to rent in Manhattan, in part because some landlords have relented about accepting share applications that they might previously have denied.

 

As far as squeezing in more people, he said, landlords are more willing to allow it. "I feel confident that if you put in an application for three people for a two-bedroom, they will probably qualify," Medina said.

 

And Yardeni maintains that New York will continue to experience what he calls "natural growth" in the rental market -- the ongoing influx of students and graduates in the city. That, he said, will continue to feed the market for shares indefinitely.

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