NYC Apartments Are Shrinking As New Construction Brings More Inventory

A wave of smaller apartments is hitting the market in New York City, bringing average rents down a bit last month amid an affordability crisis. 

But price per square foot is still on the rise, according to new data provided to Bisnow by Miller Samuel. 

“You're getting less for your money is the way to look at it,” Miller Samuel CEO Jonathan Miller said. 

In Brooklyn, where the average apartment is 969 SF, overall square footage has dropped 7% from last year. In Queens, it is down nearly 15% to an average of 811 SF. 

When broken down by new and existing developments, the new stock becoming available in Brooklyn is about 154 SF smaller than existing apartments. In Queens, it's 100 SF smaller.

A similar story is taking place in Manhattan, though less dramatically. Leasing is up 14% from last month and 54% from last year, with just over 7,700 leases. Inventory increased 8% monthly and 44% yearly.   

The average apartment is 945 SF in Manhattan, down almost 10% year-over-year. For new developments only, square footage has dropped 26%.

Renters, many of whom have been locked out of buying homes due to high interest rates, are quickly scooping up the new inventory. 

In July, Queens and Brooklyn had a record number of lease signings, according to a report by Miller’s firm and Douglas Elliman.

The 945 leases signed in Northwest Queens represented a 22% increase over June and 419% from the 182 leases signed at the same time last year. In Brooklyn, where nearly 4,500 leases were signed, that figure similarly increased 20% from the previous month and 300% from last year.

The activity is a sign that deliveries are on the rise, with the pre-421-a expiration building rush of 2022 starting to hit the market.

In Queens, listing inventory jumped 24% month-over-month and 180% year-over-year. In Brooklyn, it was up 20% and 93%, respectively. 

Despite a gap between tax incentives and difficulties surrounding construction costs, about 67,000 units are under construction, according to a report by Matthews Real Estate Investment Services.

Even that is less than needed to combat the affordable housing crisis. Mayor Eric Adams set a goal of 500,000 new units in the next decade. Last year, approximately 11,000 new units were built, according to the Real Estate Board of New York. 

Many of the new buildings hitting the market are luxury properties with a suite of amenities, so while average apartment sizes are shrinking, more space is being taken up by pet spas, coworking spaces and wine cellars. 

Regardless of size or amenities, thanks to that new inventory, all three boroughs registered a decline in median rent — a slight relief from last year when each month came with a new record. In Manhattan, the median rental price clocked in at $4,300, down 2% from last year. Brooklyn is at $3,600, down 9%, and Queens recorded $3,450, down 5%.

New development takes approximately 5% of the market share in Manhattan, 12% in Brooklyn and 18% in Queens. 

Vacancy only ticked up slightly to 2.9% from 2.6% last July, according to the Elliman report, showing how tight the market still is.