What ever happened to Boston’s high barriers to development? Builders finished 5,100 new apartments here in 2007, according to the research arm of Marcus & Millichap. That’s a 3 percent increase to the local inventory. It still can take up to seven years to get a project approved and construction started in this contentious city, but developers have stretched their patience and their budgets to overcome development hurdles. So many made the leap that in 2007 their completed apartments pushed the vacancy rate up 90 basis points to reach 5.9 percent at year’s end. However, there is hope for the future: Completions are expected to fall to about 3,000 in 2008. With the help of strong job growth, that should drop the vacancy rate to the mid-5 percent range, according to Marcus & Millichap.
One of the slender towers rising over Waterplace Park downtown may soon turn into a rental apartment building, at least for a year or two. This spring, Boston developer Intercontinental Real Estate Corp. will finish 193 luxury condominiums in two high-rise buildings at its Waterplace Park development, but by January only a handful had sold. Intercontinental is considering renting the units in one of the towers until the condominium market firms up. There’s one problem: Providence has the highest vacancy rate of any major Northeast rental market. Effective rents grew just 1.4 percent here in 2007, according to Reis, Inc. At least rents grew instead of shrinking, and the percentage of vacant apartments dropped from a whopping 9.2 percent in the first quarter to a more manageable 6.9 percent at the end of the year. That new-found stability could vanish if enough of the more than 1,000 condos now under construction downtown enter Providence’s 15,000-unit rental market.
NEW YORK CITY
If you can find an apartment here, you can find one anywhere. New York City’s percentage of vacant apartments dropped to 2.1 percent at the end of 2007 from 2.3 percent the year before, making it the Northeast region’s tightest apartment market, according to research firm Reis, Inc. The vacancy rate is now at its lowest point since the Sept. 11 terrorist attacks. Experts thought vacancies would rise last year, even before the economy began to falter. But developers finished fewer apartments than expected, adding just 1.7 percent to the inventory. These 2,400 new apartments weren’t enough to fill the demand of new tenants drawn here by stronger-than-expected job growth. In addition, developers took more than 400 apartments off the market in 2007 to convert to condominiums. Yes, that’s right, even in a nationwide for-sale housing crash, a few New York City neighborhoods still have booming condo markets. Citywide, condo prices rose 17 percent in 2007, according to the Real Estate Board of New York. New York’s shrinking number of vacant apartments helped push effective rents up 9 percent in 2007, according to Reis. That’s the strongest rent growth of any major Northeastern market.