Boston’s multifamily market is showing signs of stability as steady leasing over recent quarters has lowered the vacancy rate and driven rent growth. With quarterly absorption averaging around 2,000 units over the past year, representing over 2% of the inventory, the market is moving toward a healthier fundamental balance. This performance, while below the peak rates seen at the end of 2021 and slightly under the average of 3.4% from 2015 to 2019, reflects a positive trend in demand.

Strong absorption has been noted particularly in the urbanized Somerville/Charlestown and Allston/Brighton submarkets, as well as several suburban areas such as South Shore and Quincy/Milton/Randolph. Conversely, demand in some infill neighborhoods, including Downtown Boston and northern suburbs like Chelmsford/Tyngsborough/Townsend, has weakened. This shift indicates a changing landscape in multifamily demand dynamics throughout the region.

Throughout 2022 and 2023, the Boston market faced an oversupply situation, with growth in new units outpacing absorption by approximately 2,000 units. However, this imbalance is beginning to correct itself, as the vacancy rate has decreased to 4.9%, down 0.4% over the past year. This decline suggests the market may have reached its cyclical peak, with expectations of returning to historical equilibrium.

In comparison to national trends, Boston’s multifamily performance remains robust. The national vacancy rate has surged by 300 basis points since Q3 2021 due to rapid supply growth in Sun Belt markets. Historically, Boston’s vacancy has been around 100 basis points lower than the national average, but this gap has widened to over 250 basis points, signaling Boston’s relative stability amid national fluctuations.

Despite a decline in year-over-year rent growth from near double digits in early 2022 to 2.8%, growth is projected to strengthen later in the year, outpacing the national average of 1.0%. This resilience in the market contributes to ongoing investment activity in Boston, where multifamily properties remain appealing despite rising cap rates and a 15% decrease in values since mid-2022. With demand formation expected to remain steady and rent growth poised for an uptick, Boston continues to be an attractive option for multifamily investors.

Ready to explore opportunities in Boston’s multifamily market? Contact ABG Commercial Realty today, and let our team of experts assist you in navigating this evolving landscape and capitalizing on promising investments.