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BOSTON-This city has jumped five spots in the rankings of apartment markets, according to Marcus & Millichap Real Estate Investment Brokerage Co.’s recently released National Apartment Index. Boston went from number 9 in the rankings last year to number four this year. The index is a snapshot analysis that ranks 40 apartment markets nationwide based on a series of 12-month, forward-looking supply-and-demand indicators.

The report issued by Marcus & Millichap attributes Boston’s improved ranking to a combination of expectations for solid job growth, limited new construction and one of the lowest vacancy rates in the country. Top-ranked markets typically are characterized by employment growth, rental growth, low vacancy, falling construction levels and a shortage of affordable single-family housing due to development constraints.

In Boston, the report finds that, while vacancies increased in 2002, the city’s apartment market still remains one of the tightest in the nation. Apartment owners in Boston suffered a net loss of tenants during 2002 as the vacancy rate jumped to 4%, a 1.7% increase. But job growth is expected to return to the market in 2003, pushing rates down to an anticipated 3.8% by year-end.

The report also indicates that asking rents increased slightly in 2002–although concessions made by property owners to lure tenants put a dent in effective rents. Average asking rents climbed .7% last year to $1,542 per month. But tenant demand, fueled by potential job growth in 2003, should push rents up by approximately 2%, to an average of $1,573, the report predicts. In Cambridge and Back Bay, two of Boston’s high-profile submarkets, the report notes that vacancies barely moved when the rest of the area softened, and average rents remain above $2,000 a month.

Finally, the city’s significant barriers to entry ensure that new apartment development in Boston will remain minimal. The report points out that developers added just 1,828 units in 2002 and completions for 2003 are projected to total only 1,860.

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