With a high quality of life and an attractive mix of employers, Boston remains a strong market for renters as well as multifamily investors and developers. The city’s well-known universities also add to the overall prestige of the market from both renter and investor perspectives, according to Carl Whitaker, director of research and analysis at RealPage.
Boston continues to be a leader out of the nation’s gateway markets. “Boston doesn’t appear to have as many near-term headwinds as many of the West Coast gateway markets,” says Whitaker. “The local Boston economy appears to be on better footing than many of those West Coast peers. Further, the Boston market doesn’t show a big spike in deliveries a la Los Angeles or Seattle either.”
He says the market is a great example of what rent growth tends to do when demand is stable and new supply headwinds are muted.
“Boston has recorded four straight quarters of positive absorption, with annual absorption in the year-ending third quarter clocking in at 3,091 units. Though by no means is that historically strong, but that consistency coupled with stable supply (7,300 new units have delivered in the past 12 months, accounting for just 1.2% of all existing multifamily stock) has led to positive rent growth momentum,” he adds.
As of September, according to RealPage, the effective asking rent change was 3.1%, while occupancy sat at 95.6%.
Whitaker says the market tends to be seasonal, where demand in the fourth quarter almost always comes to a halt. With a typical slowdown in fourth quarter absorption, he expects annual rent change to ease below 3% by end of the year due to late-season movement.
“Beyond 2023 though, we’ve got Boston slated to be arguably the strongest of all the gateway markets,” he says. “Though a modest uptick in supply is forecast in 2024 as an expected 8,500 units deliver, that’s not necessarily a level we think will cause the market’s rent growth to soften all that much from current levels. Further, local occupancy levels have effectively stabilized around their pre-pandemic levels, which suggests the market has returned to equilibrium on that side of things as well.”
For 2024, most of the new supply is expected to deliver in and nearby the city’s urban core. The Chelsea-Revere-Charlestown submarket is expected to lead the market with over 1,500 new units, followed by the Fenway-Brookline-Brighton submarket with over 1,300 units. East Middlesex County and Quincy are expected to lead the suburban submarkets with 1,033 and 834 units, respectively.
In line with the nation, Boston has seen a pullback in investment activity. According to Whitaker, approximately $3.6 billion worth of properties have traded in the past 12 months, down from about $5.6 billion over the prior 12-month period from 2022.