Economic conditions in Greater Boston aren't in the best shape — and that's putting pressure on multifamily fundamentals in the area. A first-quarter market report from Colliers shows slowing rent growth and spiking vacancy.
Per multifamily unit, rents only saw 0.3 percent growth year-over-year to $2,850. This marks the smallest increase seen in almost five years. Plus, concessions as a percentage of rents are at 2.1 percent, marking the highest rate seen since the early portion of 2021.
Vacancy increased by 80 basis points to 6.9 percent, with Colliers attributing the spike to a slowdown in leasing and new supply, which actually fell to 1,736 units in the first quarter. Deliveries were down about 1,000 units versus the same period a year ago.
At the forefront of the challenges for Greater Boston right now, as is the case nationally — is the oil shock that's causing a spike in energy prices and inflation. The other issue is the weak labor market in the area, with jobs declining by 0.2 percent or by 30,000 in the year through January 2026, as pointed out by Colliers, citing data from the Bureau of Labor Statistics.
"Rising inflation and tempered job growth could contribute to a slower pace of household formation, extending the market's recovery timeline," the CRE brokerage warned.
Adding more uncertainty is a proposed bill in the state legislature that would cap annual rent hikes at either five percent or at the increase seen in the Consumer Price Index, whichever rate is lower. Colliers cautioned that this could cause "long-term implications" for investors.
While uncertainties lie ahead, Colliers highlighted that the construction pipeline is slowing down.
"This trend should allow assets still in lease up to better absorb demand," Colliers said.
"Submarkets that experienced elevated supply growth during the pandemic‑era boom, particularly the Inner Suburbs, are beginning to see occupancy improvement."
Mesirow Financial made the largest buy in the first quarter, with its $218 million purchase of the property, Twenty20. The next two closest were AEW Capital Partners and Transom Real Estate, which bought multifamily assets for $55 million and $26 million, respectively.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.