When the last tenant moved out, he still hadn’t really unpacked. The 9,000 sq ft town house in New York’s SoHo still looked much as it had the day he moved in: boxes and boxes of possessions, stacked high to the ceiling, left untouched.
“He was a young tech guy who lived in New Jersey and wanted to have a place in the city to take meetings, and where he could host — but he never did,” says Brandon Trentham, the Compass agent who wrangled that tenancy. It was a pricey change of mind: the rental per month for the property was $100,000, or $1.2mn for the year.
Now that it is back on the market, Trentham is not worried about finding another deep-pocketed renter; that tech exec’s contract was the third such tenancy he had found for the building, a full-service standalone home connected to a luxury development with a doorman and all amenities.
Trentham is one of the go-to agents for renters like these, a new breed of Manhattanites in the super-prime property niche: you might call them mega renters or uber tenants. These men and women are wealthy enough to snap up almost any property on a whim, but instead choose to become tenants. The starting rate at this level of the market is $25,000 per month, but many tenants spend double or even triple that amount.
This new luxury category has grown exponentially in the past decade, according to agents like Trentham, a confluence of factors turning such turbocharged rents from a rare request to a relatively commonplace brief. Among those factors is Michael Bloomberg, who was mayor of New York for 12 years to the end of 2013 and made reshaping the city skyscape a priority of his administration — and the focus of his legacy. His office approved major developments in Manhattan’s windswept west side, both in West Chelsea and Hudson Yards, a former rail yard. Bloomberg pushed through the rezoning that permitted a forest of high rises.
Wendy Maitland is a veteran of the city’s real estate scene who now runs her own brokerage, Atelier by Wendy Maitland. “Ten years ago, you couldn’t have found 100 options for someone who wanted a rental at $25,000 [per month] or above. If you could find two dozen, you’d have been lucky,” she says. “Now there are over 50 active rentals over $50,000 on the market, with 20 recently rented at an average asking price of $75,000.” Many of the new listings are discreetly offered off-market and never make it on to New York’s MLS database, so the true tally is likely to be higher.
What these uber tenants seek, discreetly or not, is surprisingly consistent. Full-service buildings (that’s doorman, concierge and maintenance all on call 24/7, plus amenities like a gym); usually a minimum of three bedrooms; and off-street parking. “There are two sweet spots for a super-luxury tenant, because people spending that kind of money want the wow factor, to be able to impress,” says Corcoran’s Julie Pham, another agent who specialises in the sector. “They want a large living room, with high ceilings — not just 11ft, but 12ft or 14ft — to give a sense of grandeur, and views. If you have outdoor space, too, that’s the cherry on the cake.”
Those requirements limit the market to certain buildings and neighbourhoods: in particular Hudson Yards, with its shiny new towers of apartments overlooking the Hudson River, and Tribeca, via developments such as Robert AM Stern’s 70 Vestry and two Herzog & de Meuron-designed complexes, 160 Leroy and 56 Leonard.
$50,000Monthly starting price for more than 50 active rentals in New York
A big driver for the growing demand for super-prime rentals can be traced back to the pandemic-induced exodus from New York to Florida, which coincided with the normalisation of white-collar remote working. According to the US census bureau, of the 545,500 residents of New York who left in 2022, 91,201 of them — just over 16 per cent — ended up in Florida, beating neighbouring New Jersey and Connecticut.
One reason for moving to the Sunshine State was money. Layering various taxes means that those living and working in New York City might pay a combined rate of 14.8 per cent income tax (which is paid in addition to federal taxes). If they claim residency in Florida, they pay zero.
To support their domestic expat executives, certain companies have bolstered their physical presences in the state, including Blackstone and Goldman Sachs, earning South Florida the nickname Wall Street South. Yet many of those who have changed their residence are still required to return to their old offices, whether for meetings or as part of a new hybrid working arrangement. They form a core part of the uber-tenancy market.
“They’re trying to spend as little time as possible in New York but have to come in for work reasons,” says Corcoran’s Pham. “Since Covid, we’ve seen a lot of people commuting between here and Palm Beach, Boca Raton or Miami.”
They can avoid triggering Empire State taxes if they spend 183 days or fewer in New York in a taxable year. A rental property suggests less permanence, say brokers, while also affording a little more discretion.
Collin Bond runs the 14-strong Fabrikant Bond team at Compass, including a group that focuses on high-end rentals. Buying an apartment in New York is a notifiable transaction, lawyer-turned estate agent Bond points out, which means that when a purchase is completed and the deed is transferred, it’s filed with the city and state. But renting that same home is a private process.
“When you purchase in New York, it will tend to throw a red flag to the Internal Revenue Service, to the city and the state — they’re then going to see how many days you’re here. And I have had clients who live out of the city, but purchased somewhere in Manhattan that wasn’t their primary residence, and got audited because of that,” Bond says.
One particularly cautious client enables location tracking services on his smartphone, and then archives it annually, so he has a digital record of where he was at any given time. He submits it with his taxes each year, pre-empting questions from the IRS as to whether he might owe taxes in New York.
There are financial upsides for mega renters, too, as Trentham explains. Take that SoHo tenant. “He was a young tech guy, and his company had blown up, and he needed tax write-offs. If you give someone a corporate lease, and you have a residence within a five-mile radius of it, and are using it solely for business, that’s 100 per cent tax deductible,” he says.
Indeed, many of these leases are corporate ones: a C-suite executive temporarily relocated to Manhattan might demand housing as part of her compensation package. “But the company won’t want to deal with the entry and exit of holding an asset, or a big investment of buying a $15mn apartment — they will pay $50,000 per month to rent the same place, though,” says Bond. A corporate lease can also be reassigned to a different employee without breaking the tenancy, so triggering additional charges.
Maitland works with figures from the entertainment industry, both behind and in front of the camera; they are often temporary residents in New York with no sense of how long their gig will keep them there. “I just placed someone who’s a showrunner and got approved to do a series in New York, so he’ll be in the city for three years, maybe longer if he’s lucky, but he doesn’t know — it depends how the series goes,” she says.
Bond suggests there is a type of renter for whom the appeal of a six-figure lease is strategic. He points to Central Park Tower, the soaring 1,550ft building on so-called Billionaires’ Row, which has a club on its 100th floor, available solely to those who live in the building. “If you’re trying to break into that echelon, you can rent there and get access, rubbing elbows with people who’ve purchased, which is most of those who live there. It’s potentially a good [networking] investment, depending on your upward mobility and what you do for a living.”
Another example is the executive who spends, perhaps, four or five nights in New York each month. Traditionally, he or she might have opted for the penthouse suite at a five-star hotel, but surging room prices have nudged them to reconsider. Pham says around a half of her high-end rentals are pieds-à-terre, and often for this reason.
According to STR, which tracks hotel data, average daily rates in New York City reached more than $360 in November last year, about 25 per cent higher than the same period four years earlier. A similar rise is reflected at all levels. The top-priced Metropolis Suite at the downtown Four Seasons, for example, can now cost almost $15,000 per night at peak times.
“That’s for 1,200 sq ft, and for what it costs to stay there for a week, why not get a 3,000 sq ft place in a condo building for the month?” says Pham. “You’re paying through the roof for a quarter of the size. And you can leave keys for a guest, have a doorman take packages, and move in your furniture.”
The supply of homes is another factor. The architectural landscape of New York has changed radically in the past 15 years, with the development of Hudson Yards, the largest mixed-use private real estate venture in US history. Even though vacancy rates in New York hit historic lows earlier this year — 1.4 per cent in February, the tightest market since records began in 1968 — there are more luxury apartments than ever before; the issue, though, is that they’re occupied. According to real estate appraiser Miller Samuel, inventory of luxury apartments available for sale, with luxury defined as those in the top 10 per cent of the market by price, was 24 per cent down in Q3 2023, versus pre-pandemic levels.
“There are new dynamics, ever crazier penthouses with crazier prices,” says Trentham, citing hedge funder Ken Griffin’s record-breaking $238mn penthouse purchase at 220 Central Park South. Rent rises at all price points have been staggering: again, Miller Samuel data showed that average Manhattan rents were up 30 per cent in summer 2023 versus just four years earlier. “All rents have gone up, and it trickles up from the bottom to the top of the chain.”
Deep pockets might make it easy to pass the financial checks, but they don’t guarantee good behaviour from a tenant. Mega renters can prove as troublesome as a group of college students. “For the most part, people who rent at this level are good tenants,” says Bond. “But the problem is when you run into a bad tenant at this level. They’re very wealthy, and it’s very challenging to nail them down, as they also have the assets to fight.”
He recalls the forced eviction of a tenant paying $30,000 per month, a financier who had breezed through background checks. Only later did the owners learn the banker had stiffed previous landlords in other cities, but had never been brought to court where records would have been easier to find. They did take him to court, and ended up recouping not just rent but attorneys’ fees. “We went in to assess the damage, and found out he had literally removed walls — apparently, he’d had contractors in, and told them to rip everything up, put it in bags and carry it out. The super [property manager] had no idea about it.”
Pham had a similar experience with a tenant she placed, a businesswoman paying about $50,000 per month to live in Hudson Yards. Though the development was new, she haggled hard around fixtures, insisting that the owner split the cost of upgrading the toilets to high-tech Toto units. When Pham and her team walked through the apartment after she vacated it, all seemed fine; a week later, Pham was startled to see those Toto toilets had vanished, replaced by standard cisterns. “The tenant stole the toilets, and technically, she didn’t have the right to re-enter the apartment to do it,” says Pham. “It was so weird.”
Sometimes, behaviour can tip into cruelty, as Trentham experienced. Last year, he rented a furnished town house to two men — “Bitcoiners”, he says, inhaling slightly — for around $55,000 per month. The owners had left personal possessions locked in cupboards, as part of the agreement. Not long after the pair moved in, a neighbour reported seeing boxes of photos and other keepsakes on the kerbside, ready for trash collection. They scooped up what they could, but when Trentham’s team investigated, they learnt that much of what the owner had left locked away had been either disposed of or sold on Facebook Marketplace.
“They were crying, for all their kids’ memories, family photos,” he says, “And when we spoke to the tenants, they had zero remorse. They were young punk kids with stupid money. And they said ‘We asked for all personal items to be taken out, and if you want to sue us, go ahead’.”
Then again, it isn’t always the tenants who are at fault. Another of Trentham’s listings was a $75,000 rental, where he ended up inadvertently connecting the homeowner and potential tenant. “They ended up hanging out, getting drunk together and the owner ended up hitting on the tenant,” he chuckles. “It wasn’t the way you’d think, either: it was a woman hitting on a man. But it became so uncomfortable after that, that two months later, the tenant moved out early, saying he couldn’t deal with it anymore because the owner was in love with him.”
Find out about our latest stories first — follow @FTProperty on X or @ft_houseandhome on Instagram
Read the full article here
