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METRO BOSTON MULTIFAMILY MARKET REPORT
YEAR END | 2019
303 CONGRESS STREET | BOSTON, MA 02210 | 617.457.3400 | HUNNEMANRE.COM
2 | METRO BOSTON MULTIFAMILY | YEAR END 2019
BOSTON MARKET MULTIFAMILY OVERVIEW
The Greater Boston Multifamily Market ended the decade as the nation’s third
most expensive with a much needed supply injection taking place in 2019 to
help mitigate rental growth. Over the last year, vacancy rates have ticked up to
5.4% due to this jolt in supply whereas rental growth has remained relatively
static across the region, sitting at an average of $2,359 per month. Nevertheless,
Greater Boston has shown strong economic growth relative to the rest of
the nation and rents are expected to reach new heights in 2020 as the region
continues to attract employees and companies alike from around the globe.
Fueled by the influx of healthcare, technology, and life science companies,
Greater Boston’s unemployment rate sits well below the national average at 2.6%
with a population base that is nearing 5 million people.
From a supply standpoint, market rate deliveries reflect an increase in demand
for luxury units. As the decade came to an end, developers completed an
additional 4,300 units in the fourth quarter alone. Notable completions such
as NEMA Boston and Hub 50 House each delivered 400+ luxury units to the city
of Boston, with average rents surpassing $3,500/unit. Unsurprisingly, much of
the construction in Greater Boston has been concentrated in the urban core,
Cambridge, and inner suburbs. Specifically in Boston, there is a continuation
of new activity in the Seaport and North Station neighborhoods where average
rents command $3,800/unit and $3,500/unit respectively. In total, 2019 deliveries
reached 7,455 units which is a 9.4% increase from 2018.
The increase in demand for luxury units can be best explained by several key
factors: the millennial generation entering their prime renting ages, the influx of
high paying jobs, and foreign migration primarily lead by a prevalent international
student population. However, it is also imperative to note that increasing land
acquisition and construction costs have impelled developers to popularize class
A properties for better returns. Since 2016, the split between class A and class
B/C units in the Greater Boston market has tightened from 45%-55% to nearly an
even split. In the coming years, expect to see class A units claim the lion’s share
of inventory.
While Boston is experiencing one of its greatest building booms, affordable
housing continues to be a crisis point. The consensus between developers and
city officials is that increasing the supply will help alleviate high rental rates.
However, the market has yet to soften despite the significant influx of supply in
2019. To combat this, Governor Charlie Baker has signed and asked legislators to
approve a Home Rule Petition which would require developers to either include
income-restricted housing in large new developments or pay a hefty fee. These
development fees would be strictly regulated by the city. In addition, potential
impacts of the Air-BnB legislation that became effective in August will likely cause
1/3 of all active listings to be dropped from the platform. While this could lead to a
slight uptick in supply if some tenants are unable to maintain rent due to the lack
of cash flow from Air-BnB, this is not expected to have a major effect on the market.
5.4%
TOTAL VACANCY RATE
$2.67 ASKING RENT
($/SF)
6,185ABSORPTION UNITS
(YTD)
7,455UNITS DELIVERED
(2019)
19,500UNITS UNDERWAY
(2019)
UNDER CONSTRUCTION (UNITS)
3 | METRO BOSTON MULTIFAMILY | YEAR END 2019
MARKET RATE
TOTAL INVENTORY(UNITS)
TOTAL VACANT(UNITS) TOTAL VACANCY RATE YTD NET ABSORPTION ASKING RENT
($/UNIT)
Urban Boston 51,355 2,748 5.5% 1,829 $3,049
Cambridge 11,171 506 4.5% 520 $3,110
Route 128 87,740 4,518 5.2% 2,543 $2,206
Route 495 47,177 2,660 5.6% 1,159 $1,791
Total 198,710 10,654 5.4% 6,185 $2,359
• Greater Boston remains to be one of the most expensive rental markets in
the nation. Due to its dense population, limited airspace, and notorious
barriers to development, Boston has consistently ranked in the top 5 for
most expensive rental markets. Rents across the metro have continued
their upward pace. Units in the Back Bay are surpassing $4,300/unit
while Seaport and North Station boast average rents in the mid to upper
$3,000s/unit.
• The Greater Boston multifamily market ended 2019 with a grand total
of 198,700 units of inventory. Despite timely project approvals and stiff
construction costs, annual inventory growth has jumped 3.2%, almost
doubling the national average of 1.7%. In congruence with other metros,
most of the developments have sprouted from urban neighborhoods with
immediate access to public transit.
• There are currently 19,500 market rate units underway in the Greater
Boston multifamily market. Of these units, 86% are class A properties that
are expected to deliver in the years 2020 and 2021. The top three largest
projects, which include 700 units at Vero, 610 units at The Abby, and 600
units at The Smith, are all located in Urban Boston and the Inner Suburbs.
• The uptick in year end vacancy rate can be attributed to the surge in
deliveries at the end of the decade. Even so, vacancy rates should remain
relatively stable in the coming years as rising demand will balance
the market’s supply line. Neighborhoods along Routes 128 & 495 yield
the most stable rates while Urban Boston & Cambridge have seen
greater fluctuations due to heavy construction activities. Most notably,
Cambridge’s vacancy rate dropped from 8.8% in the second quarter of
2018 down to its current 4.6% rate.
• Multifamily sales in the Urban Boston, Cambridge, and Inner Suburbs
have been dominated by small-property deals as of late which could put
upward pressure on rents as buyers attempt “flip” for higher yields. Of the
55 multifamily sales in 2019, 73% of the exchanges came in properties
with 50 units or less. With vacancies for Class A and B multifamily space
at just 6.3%, developers and investors are seeing more opportunities for
smaller developments and redevelopments as construction and land
costs have reached record highs across the metro.
TOTAL VACANCY
RENTS
UNITS COMPLETED
2015 2016 2017 2018 201919 QTD
BOSTON/ CAMBRIDGE ROUTE 128 ROUTE 495
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019
BOSTON/ CAMBRIDGE ROUTE 128 ROUTE 495
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
2015 2016 2017 2018 2019
CLASS A CLASS B/C
4 | METRO BOSTON MULTIFAMILY | YEAR END 2019
AFFORDABLE RATE
TOTAL INVENTORY(UNITS)
UNITS COMPLETED(2015-2019)
EXPECTED COMPLETIONS(2020)
Urban Boston 17,468 865 92
Cambridge/Inner Burbs 7,926 186 226
Route 128 21,215 496 -
Route 495 14,431 220 189
Total 61,040 1,767 507
• In years past, affordable housing developers had to meet one of two set-
aside tests in order to qualify for LIHTCs: 20% of their units have to be
offered at 50% Area Median Income or 40% of their units have to be offered
at 60% AMI. Now, under the new income averaging law, developers can
also qualify for tax credits if the average of the building’s imputed income
limitation does not exceed 60% AMI, allowing for a greater variety of unit
mix and more opportunities to obtain these coveted tax credits.
• Pricing on 4% and 9% Low Income Housing Tax Credits are beginning
to make a comeback since they dropped below $1 per credit at the
beginning of 2017. National pricing trends have shown an increase
from $0.92 to $0.95 per credit since March 2019, and credits on deals in
the Metro-Boston area are consistently being priced between $0.95 and
$0.98 per credit, thus providing more equity and increased incentives for
affordable housing developers.
• “The Watson”, one of WinnCompanies’ most anticipated developments,
finished construction in November, adding 140 mixed-income units to
the City of Quincy. This development has been awarded ULI’s Terwilliger
Center for Housing’s 2019 Jack Kemp Excellence in Affordable and
Workforce Housing Award for their inclusion of 86 “middle-income” units
offered to individuals whose incomes are too high for traditional housing
subsidies but too low to afford rising market rate rental costs.
• International developer Lendlease recently completed the 478-unit,
550,000 square foot “Clippership Wharf Apartments” in East Boston on
the Boston Harbor. This four-year project took advantage of 4% and 9%
LIHTCs, and pre-sold all 80 of the development’s condominiums before
completion in late September. WinnCompanies is set to complete a 104-
unit, 107,000 square foot mixed-income development known as “The
Residences at Brighton Marine” on Commonwealth Avenue in Brighton
by the end of December. Units will be offered with preference for veterans
and military families, and 11 units will be set aside for formerly homeless
veterans.
AMI INCOME LIMITS | MA
FAIR MARKET RENTS
UNITS COMPLETED
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
$90,000
$100,000
1 Person 2 Person 3 Person 4 Person 5 Person 6 Person 7 Person 8 Person
EXTREMELY LOW VERY LOW LOW
$0
$400
$800
$1,200
$1,600
$2,000
$2,400
$2,800
Studio 1-Br 2-Br 3-Br 4-Br
2016 2017 2018 2019
0
300
600
900
1,200
1,500
1,800
2,100
2016 2017 2018 2019
BOSTON CAMBRIDGE SUBURBS
5 | METRO BOSTON MULTIFAMILY | YEAR END 2019
• With total sales volume at $3.2 billion, Greater Boston’s multifamily market
was thought to have reached its cyclical peak in 2015. From 2016-2018,
average sales volume dropped 17% from peak figures, as all-time high
prices signaled a weakening market for investors. However, 2019 beat all
expectations, crushing 2015 by 24%. The market experienced a strong
surge in activity during this year’s fourth quarter when sales volume
topped $1.44 billion. Most notably, the 1,385 unit Overlook Ridge Portfolio,
bought by Rockpoint Group, exchanged for $411 million at $297,000 a
unit, making up a third of the quarter’s exchanges. In aggregate, 2019
sales volume crept north of $4 billion, trading at an average of $373,000/
unit.
• Since 2016, average cap rates have remained sub-5%, including this
quarter’s 4.6% rate. Lower cap rates can be explained by the increase
in exchanges of highly coveted luxury units. For instance, The Girard,
Watermark Seaport, and Tower at Greenland, all Class A assets located in
the urban core, sold for sub-4% yields in the past few years. With cap rates
compressing, investors have looked to the 495 belt when looking for cap
rates above 5%. To that extent, route 495 sales volume grew by 133% from
2018 while urban sales volume remained relatively stable.
TOP 2019 / INVESTMENT SALES
OVERLOOK RIDGE PORTFOLIOREVERE
624 WALPOLE STREETNORWOOD
CHARLES RIVER LANDINGNEEDHAM
WATERSIDE PLACEBOSTON
Buyer Rockpoint Group Buyer UDR Buyer UDR Buyer GID Investment Advisers
Units 1,385 Units 914 Units 350 Units 236
Sale Price $411,500,000 Sale Price $270,000,000 Sale Price $172,000,000 Sale Price $154,000,000
UNITS SOLD(#)
MEDIAN CAP RATE YTD SALES VOLUME($)
14,587 4.6% $4.04B
SALES VOLUME
MEDIAN PRICE
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
2015 2016 2017 2018 2019
Mill
ions
BOSTON/ CAMBRIDGE ROUTE 128 ROUTE 495
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
BOSTON/ CAMBRIDGE ROUTE 128 ROUTE 495Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019
CAPITAL MARKETS
303 CONGRESS STREET | BOSTON, MA 02210 | 617.457.3400 | HUNNEMANRE.COM
METHODOLOGY
Source: Co-Star, Hunneman. Prepared: February 2020.
Disclaimer: The above data is from sources deemed to be generally reliable, but no warranty is made as to the accuracy of the data nor its usefulness for any particular purpose.
Average Rental Rates are asking rents on direct space. Vacant space includes both direct and sublease space.
TUCKER WHITE Director of Research
978.828.5141 twhite@hunnemanre.com
JAMES FIFTALSenior Research Analyst
617.457.3385jfiftal@hunnemanre.com
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