Multifamily is showing mostly strong fundamentals in Greater Boston — but with one caveat — elevated vacancy. The rate spiked to 6.3 percent at the end of the second quarter — the highest seen in more than four years, a market report from Colliers shows. The Inner Suburbs and the Route 128 North submarkets posted the highest levels, at 10.2 percent and 9.1 percent, respectively.
The performance comes as supply flooded the market in the second quarter.
"The number of units completed in the quarter — more than 3,000 — was one of the highest of the post-COVID era," Colliers explained.
"This includes five complexes — Station 316 Apartments in Woburn, Artemas in Everett, Verra in Allston, Alexan Chelmsford in Chelmsford, and The Shipwright in Lynn — of at least 300 units in size."
But if you can get past the elevated vacancy, it was actually a solid period for Greater Boston's multifamily sector.
Over the past 12 months, rents have climbed by 2.2 percent to $3.28 per square foot. According to Colliers, the growth outpaced Sunbelt markets including Atlanta, Austin, Phoenix and Charlotte, where rents actually declined. Also, home prices in Boston over the past five years have spiked by more than 50 percent, with the 30-year mortgage rate exceeding six percent. That makes it tougher for residents to transition from renting to owning, according to the CRE firm.
Additionally, Colliers noted that second-quarter absorption "was healthy."
While second-quarter deliveries were elevated, just 4.2 percent of the inventory was under construction, marking the lowest levels seen since 2012. That trend could lead to more rent growth in Greater Boston.
"As deliveries slow, landlords may find themselves in a favorable position to push rents," Colliers admitted.
However, headwinds remain. One is the economy, with Colliers citing low consumer confidence and fears of a potential recession. Boston had just 0.2 percent job growth in May, which, according to Colliers, trails peer regions.
"Boston University and the State of Massachusetts Executive Branch have implemented hiring freezes and or layoffs because of concerns about the stability of their federal funding," it wrote.
The other things investors should watch out for are immigration and rent control policies, Colliers cautioned.
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