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Boston Area Multi-Family Market Report for Q3 2020

 

 

 

Overview

Boston's apartment landscape has fully recovered from 2020 and, as the second half of 2021 turned over, had significant long-term benchmarks in view. Notwithstanding future impacts from COVID-19 variants, several key performance indicators were on pace to match or eclipse five- and 10-year high marks. There are two main drivers to this reversal: a resilient local economy and a development pipeline that has peaked.


Occupancy, having already risen over 94% at the turn of 21Q3, is within roughly 150 basis points, exceeding a level not seen since 2013. Fading vacancy is the direct result of net absorption that will almost certainly set a new decade-high mark, if not a market-wide record. Rent performance in terms of annualized gains and average asking levels is also on pace for an unprecedented finish. This embarrassment of riches—at least from the owner/operator side—isn't evenly distributed, of course, and suburban submarkets are more likely to have outsized pricing power.


The ability to raise rents is still tempered to some degree by incoming competition. But this year could be the first in the past five when new units don't top 8,000, and CoStar is forecasting a much thinner development pipeline over its Base Case five-year forecast. This deceleration is particularly timely given that almost 11,500 units delivered in 2020.

Just as most construction in the past 12-24 months has been in Boston proper or its first-ring suburbs, so has most of the top-dollar investment. While significant volume has poured into northern parts of the metro, the highest price tags and lowest cap rates can be found near Harvard and MIT, the Seaport area, Downtown, and Fenway/Mission Hill. The third quarter had barely begun when the sale of NEMA Boston made headlines, with the Seaport tower trading for over $800,000/unit. 

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Information provided by CoStar.com

 

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