Boston’s multifamily market has experienced steady leasing over the past few quarters, which has contributed to a downward pressure on the vacancy rate, while pushing rent growth upward. The supply side has stabilized quickly, and a healthy balance is starting to emerge. Quarterly absorption has averaged around 2,000 units in the past 12 months, representing over 2% of inventory. Although this is below the peak levels seen at the end of 2021, it is still a sign of healthy demand.

Absorption has been strong in several submarkets, including Somerville/Charlestown, Allston/Brighton, and areas south of Boston such as South Shore and Quincy/Milton/Randolph. Demand has also rebounded in Back Bay/South End. However, some neighborhoods, such as Downtown Boston and certain northern suburbs like Chelmsford/Tyngsborough/Townsend, have seen weaker demand. From early 2022 to late 2023, supply growth outpaced absorption, but this imbalance has started to fade, with the vacancy rate now at 5.4%, a slight improvement of -0.1% over the past year.

Boston’s market performance remains strong compared to national trends. While vacancy rates have risen across the U.S., largely due to rapid supply growth in Sun Belt markets, Boston’s vacancy rate has traditionally been lower than the national average. However, that gap has narrowed and is now over 250 basis points. Despite a decline in year-over-year rent growth from a near double-digit rate in 2022 to 2.0% currently, Boston’s rent growth still exceeds the national average, which stands at 1.1%. This resilience in rent growth has supported investment activity in the city.

Although rising interest rates have led to increased cap rates and a 15% decrease in property values since mid-2022, Boston’s multifamily market has remained liquid. The sale of several 5-star properties in the past 12 months reflects this ongoing investment interest. While cap rates are expected to continue rising, Boston could still prove to be an attractive market for multifamily investors if demand remains steady and rent growth continues to outpace national trends.

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.