Boston's strong local economy, followed by strong demand, is expected to drive what Marcus & Millichap calls "greater" rent growth within the city's multifamily sector, according to a report from the CRE firm.
This year, Marcus & Millichap projected that Boston will add 26,000 new jobs. Even though the unemployment rate at the beginning of the year was the highest seen since 2021, the Calabasas, California-based company noted that there are job openings and employers shouldn't have as tough of a time filling them.
"Sustained employment growth prompts apartment demand to outweigh the relatively limited new supply, reducing metrowide vacancy to 4.6 percent by the end of the year," it wrote. That vacancy rate would represent a drop of 20 basis points.
Recommended For You
Marcus & Millichap sees inventory growth lagging behind the 10-year average of 1.8 percent. Taking that into account, along with expected strong demand, the brokerage is forecasting that rents will rise by 3.8 percent from 2024 to $3,125 per square foot this year. That would put Boston in line with one of the 10 major metros in the country to see rent growth exceeding 10 percent since 2022.
To no surprise, this will attract investors to the market, with their interest ranging from a wide range of multifamily assets, depending on their preferences.
"Post-2015 built assets are likely to stay in high demand due to the metro’s chronic undersupply of housing, especially in the urban core where ownership is out of reach for many," said Marcus & Millichap.
"Investors seeking higher yields may focus on Class C apartments, which posted lower vacancy and stronger rent growth last year compared with higher-tier properties."
Part of what's scaring away development opportunities is elevated financing and construction costs. However, Marcus & Millichap does wonder if Massachusetts' $5 billion spending bill, which passed last year and aims to address the housing crisis the city faces, will help spur some activity in Boston. The action allows accessory dwelling units, incentivizes conversions of vacant commercial buildings and supports affordable housing.
Regardless, Marcus & Millichap anticipates that the Allston and Somerville neighborhoods will see "heightened investment activity" thanks to their expansions in transit infrastructure.
© Touchpoint Markets, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more inforrmation visit Asset & Logo Licensing.
Anthony Russo
Anthony Russo has been contributing to GlobeSt. since July 2024. Along with CRE, his financial background expands to capital markets, the economy, and consumer issues. Previously, he has written for CapitalWatch and was a senior reporter for The US Sun.
