Revere, Mass.—Five miles outside of Boston, on the border between the suburbs of Revere and Malden, Roseland Property Co. has found a place to build 2,800 new luxury apartments and condominiums.
Apartment building is booming in Boston’s oldest suburbs. New luxury communities are opening in old, working-class towns like Revere and Malden just north of the city and in Quincy to the south, even though these old, inner-ring suburbs, well inside the beltway of Interstate 95, have never been known for luxury rentals.
Developers can find the land and get the zoning to build in these towns more easily than in much of the Boston market because the towns often have old, neglected industrial sites that local officials are eager to see transformed into properties that can once again contribute to their economies and tax bases. “Because of the torturous government regulation here, new multifamily has to go where it can go,” said Tom Meagher, president of Northeast Apartment Advisors, a local research firm.
Even though these are new markets for luxury rentals, according to Meagher, so far these new projects are filling up rapidly. Roseland’s first 310 apartments at Overlook Ridge opened in December 2004, and the apartments leased a respectable 20 units a month, earning rents well above the local market. The next phase will open 412 apartments starting in July.
In 2006, developers finished 1,004 new apartments in the Mystic River submarket, which includes the towns of Malden and Revere. That’s a very large 4.4 percent increase to the local inventory, which has averaged just 482 new apartments a year over the last five years.
That volume represented nearly a quarter of the 4,236 apartments completed in the entire Boston metro area last year, according to market research firm Reis, Inc.
Meagher also counts eight projects in the submarket that are now under construction, though most of these are condominiums. Reis expects another 1,000 apartments to open in the Mystic River submarket in 2007.
The rents at Overlook Ridge average $1.75 a square foot, and start at $1,350 a month for a one-bedroom apartment and $1,750 for a two-bedroom. That’s $100 a month more than the average rents in the submarket, according to Reis, and $200 more than the average rent for a two-bedroom.
As the new apartments open at Overlook Ridge, the average rent is rising, growing to $1,328 a month in the Mystic River submarket in 2006, up 3.6 percent from $1,282 a year earlier. That includes an average concession of roughly one month’s free rent.
Quincy’s new deal
The 316 apartments at the Village at Quarry Hills in Quincy succeeded so well in creating a new market for luxury apartments here that as soon as the project finished leasing up in September, Archstone-Smith, a real estate investment trust based in Englewood, Colo., bought the project for the astonishing price of $107 million, or $314,000 per unit.
That’s reportedly the highest price ever paid in the state for a suburban apartment community. New construction has also spiked in the South Shore submarket, where developers finished 541 new apartments in 2006. That’s just a 1 percent increase to the submarket’s inventory of apartments, but still much more than the 369 units a year that the market produced on average over the last five years.
Both Quincy and Overlook Ridge were built on old quarries. For Roseland, the 100-acre site was an opportunity that seemed too good to pass up, despite the challenge of turning the deep pits and tall cliffs of the quarry site into a level surface for building apartments.
“The geotechnical engineers, they’ve had a blast,” said Joe Shea, senior vice president for development for Roseland. The developer has had a long experience with sites like these. Roseland made its reputation by turning defunct industrial sites along the Hudson River into what is now New Jersey’s Gold Coast.
Neither Overlook Ridge nor the Village at Quarry Hills reserve any of their units for low-income families. That’s unusual in suburban Massachusetts, where often the only way to win the right to build over local opposition is to use a state law, Chapter 40B, that can overrule local zoning officials in towns with little affordable housing, and force them to allow projects that include some affordable housing.
But the officials in Malden and Revere welcomed Roseland, even without the threat of Chapter 40B. “They were very excited about having something happen to the quarry,” Shea remembered.
Though only 5 percent of the apartments are vacant at Overlook Ridge, the vacancy rate has crept higher in the surrounding market, from 2.3 percent in 2001 to 6 percent in 2006 in the Mystic River submarket around Revere, and from 1.6 percent to 5.5 percent over the same period in the South Shore market around Quincy. That’s in line with the vacancy rate over the whole metro area, according to Reis.
Reis expects the vacancy rate in the Mystic River submarket to rise 6.3 percent in 2006 and then dip slowly back toward 5.5 percent over the next four years.
Prices are also rising for apartment assets in these inner-ring suburbs, though few analysts keep separate numbers for the submarkets. In December, Jefferson at Dedham Station sold for $76 million or $252,492 per unit. In Somerville, just north of Cambridge, 50 Cragie St., a property built in the 1960s, sold for $6.1 million, or $184,848 per unit. These are the highest prices in the area, except for in Boston itself.