Slump echoes in Manhattan dwellings
It’s another slow Friday morning inside the sunny, 4,000-square-foot Manhattan office of Best Apartments Inc. when the first potential client strolls in.
Senior real estate agent Kevin McGraw zeros in on the apartment-seeker, who has just visited three tiny studios that McGraw’s real estate firm is offering in the $1,500-a-month rent range. McGraw, 40, an easygoing, blue-eyed actor, hasn’t had a lease signing all month.
With apartment prices dropping across the city, McGraw knows now is the time to make deals. He’ll ask the landlord to shave another $50 off the rent, McGraw tells the client, “if you jump on it now -- like, today.”
The client fidgets, unconvinced.
Despite the river of people hankering to live in Manhattan -- where apartment prices have tripled in the last decade -- the real estate market here has not been spared the country’s economic woes.
New York lost nearly 14,000 private-sector jobs in October, and across the city, out-of-work tenants are breaking leases and moving out of Manhattan, real estate agents say, as landlords lower rents and fees, and sellers lower condo and home prices.
The city’s rental vacancy rate has doubled to nearly 2% since this time last year, according to a report by CitiHabitats. That might not seem like much elsewhere, but this is New York.
CitiHabitats, a New York real estate firm, and experts expect that vacancy rate to grow. With fewer jobs, fewer people are moving in, creating fewer clients for brokers.
In addition, banks are holding back loans to local developers, and new construction has slowed while the prices of homes have dipped.
But the real estate market has not yet slumped as it did after Sept. 11, 2001, says Howard Feingold, president of Best Apartments, who opened his company in the aftermath of the terrorist attacks. At the time, he remembers, “more people were leaving the city. It was a psychological thing. People were scared.”
People are scared again. Those who live here and have decided to stick it out are bracing for what is expected to be an even tougher financial year, and across the city many are downsizing into cheaper rentals, according to leasing agents and companies.
Inside Best Apartments, which is housed in an old printing factory, Feingold’s desk sits at the front of a vast and airy room filled with rows of black chairs and birch-colored desks.
Feingold was raised in Queens and speaks with a thick New York accent. He used to be a ticket scalper.
Eating a banana near a framed copy of the Mona Lisa, he overlooks a dozen agents scattered between three tall pillars. When business is booming, the place is filled with brokers.
On this morning, Feingold surveys the empty desks. Some agents have propped their feet up on them.
His agents get paid commission-only and work their own hours, posting ads on Craigslist and scurrying out into the frigid wind and chill to show apartments.
Feingold holds up a list of residences he is trying to lease. He points to a three-bedroom apartment that would have commanded $5,200 a year ago. Now, it’s going for $3,400 a month. One-bedrooms that used to rent for $2,700, he says, have dropped to around $2,300.
“Worst-case scenario, we hit the bottom,” says Feingold, “nobody really has jobs, nobody can afford to move here.”
Few expect that to happen, though. Everyone knows Manhattan is still one of the most sought-after places in the world to live.
For McGraw, as long as people are moving into apartments, he stands to make money, although so far this month he hasn’t.
When demand is high and supply is low, brokers like McGraw charge clients 15% of a year’s rent on apartments they sign. In this downturn, many landlords are instead coughing up money for the broker fee.
Inside the office, heaters hum as McGraw’s client mulls over one apartment on the market for $1,650 a month. He doesn’t like its pink bathroom, or that it has two burners in place of a stove.
“If you want to go for it,” McGraw tells him, “I’m begging you to just jump on it.”
The client smiles politely and says, “Uh, I’m going to wait.”
He slinks out.
McGraw, a dimpled Texas native who has been with the firm five years, turns to a junior agent, Aileen Morgan, a musician who is on her second day on the job.
“So that’s basically it,” McGraw tells Morgan. “That’s what we do in a nutshell.”
When the economy began to decline, Morgan decided to boost her income, so she applied to Best Apartments. Now she’s learning the ropes.
“Obviously we want to try to get him back in,” McGraw tells Morgan, who is nodding eagerly. “To me that’s the hardest part of our business, convincing someone this is a deal.”
Before becoming an agent, McGraw was a waiter at a steakhouse earning $40,000 to $60,000 a year. He got called back on a few auditions for shows like “The Sopranos,” and “Law and Order,” but never landed his big break. He answered an ad on Craigslist: “Earn $80,000 a year.”
“I was like, ‘I’m in,’ ” he remembers. McGraw didn’t earn that much his first year, but now the job pays the bills and his rent in Queens. His desk is decorated with framed photos of his wife, a tub of aloe hand cream, and a stack of books with titles like “The Sales Bible” and “740 Park: The Story of the World’s Richest Apartment Building.”
Photos of an “America’s Next Top Model” contestant flash on his computer screen. McGraw Googled her because she had shown up the day before, looking for an apartment.
An agent showed her the same studio that McGraw’s client viewed this morning. It’s a fourth-floor walk-up in a dingy building. It has one small window with a view of weed-tangled yards and brick. Its wood-paneled floors are coated in grayish-blue paint, and the place is “the size of a thimble,” McGraw says, when clients are not around.
Just around the corner is another apartment on McGraw’s list -- a two-floor penthouse with a marble fireplace, granite tabletops and tall glass windows in a luxury building with a billiard room and a doorman. All for $14,000 a month. Even that apartment owner has loosened renting rules to attract tenants, changing its “no dog” policy to allow “friendly dogs.”
If only McGraw could find someone to sign a lease for that one, his leasing record in “one of my most God-awful months,” as he says, would be back on track.
In a waiting area, another potential client is filling out paperwork. He’s Derek Yamada, 28, a model who can afford around $1,500 a month.
McGraw pulls up the photos of the same fourth-floor studio.
“It’s rent-stabilized. All utilities included.”
Yamada seems lukewarm. McGraw keeps pitching: It fits a queen bed, wall to wall. It’s bigger than most studios in this price range.
“As a matter of fact,” McGraw adds, going for the clincher, the girl from “ ‘America’s Next Top Model’ was looking at this very same apartment just yesterday.”
After leaving the office, Yamada calls back to ask if a cheaper studio is available. It isn’t. He tells McGraw he will call again. A week passes. No call.
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