The Boston apartment market is on fire. As a result there is a vast amount of equity, developer interest, and investor interest focused on the Greater Boston Market. What does this mean for the future of the Greater Boston Apartment market?
First a matter of definition, the metro Boston market encompasses all towns within Interstate 495 (Boston’s second beltway) and inwards and, therefore, does not include Central and Western Massachusetts, New Hampshire nor Rhode Island.
The overall vacancy was 4.2 percent in second quarter 2011 (REIS: Metro Boston submarket). Class A property has seen the greatest rent growth, 1.5 percent in Q2 2011, alone. However, Class B property has maintained a lower vacancy at 4.5 percent during Q2 2011, dropping from 5.9 percent.
The city of Boston has exhibited the most rental growth of any submarket of all the Greater Boston submarkets. In the city, rent is up 6.5 percent over the first half of 2011 with rents exceeding $4 per square foot and an average rent of $4,400 per unit based on a recent ARA Class A Survey. These rents are attracting developers and capital. The most recent development start is the 187-unit Avalon Exeter Apartments at the Prudential Center. This start comes after 10 years of permitting. Another recent start, The Victor by Simpson Housings, is 287 units located at Bullfinch Triangle, a former Big Dig site near the TD North Boston Garden. It is just getting underway after at least 6 years of permitting. Closer to Boston Common, The Kensington was just approved for 394 units at the entrance to China Town and the Theater District. Beyond these sites, which have started construction, there are about a dozen other institutional size apartment sites in Boston still in the planning or permitting process for rental housing.
In the suburbs, rents have also grown substantially, with concessions being nominal if any. The burn-off of concession has been substantial from 1 or 2 months’ free rent during 2007 to no free rent and higher rents. Overall, Class A property has seen the greatest rent growth (1.5 percent versus 0.4 percent in Q2 2011 and 3 to 6 percent over the last year’s rents). The market exhibiting the most growth is the Metro West market with 6 percent rent growth in 2010.
The suburbs have a modest amount of development anticipated for the rest of 2011 and 2012. The most active town is Stoughton in the Route 128 South market with several projects that are under construction or recently completed, including Hanover’s 240-unit The Lodge at Stoughton and Woods Partners’ Indian Woods. The Metro West market has one large project totaling 407 units. This project, Chrysler Apartments, is across from the Natick Mall. Avalon Bay just purchased the development rights for this project from Forest Properties.
We should watch the timing and impact of new developments hitting the market in Boston. In the meantime, we expect strong rent growth for at least 2 to 3 more years as a result of new job creation, an increased preference for renting, and lack of new supply. Rent in the city of Boston will continue to grow with the increase in the cohorts 20- to 35-year-olds and empty nesters who have a preference for urban rentals flowing in from the suburbs.
— Richard Robinson, principal with the Boston office of Apartment Realty Advisors.