Marcus & Millichap

Boston Multifamily Market Report

Boston Metro Area, Fourth Quarter 2017

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Boston Attracts Biotech and Startups, Underpinning Housing Demand

Job growth bolsters housing demand. Boston’s economy has benefited greatly from startups and the growing biotech industry, which attracts significant venture capital funding. The numerous higher-education institutions within the area supply qualified workers to these employers, driving steady household formation and underpinning housing demand. Many young professionals entering the workforce opt to rent instead of own as home prices rise at a faster pace than median household incomes to unaffordable levels. As a result, apartment vacancy in Boston rested below a tight 3 percent in the third quarter.

Low vacancy fuels development. To meet the need for quality rentals amid still-tight vacancy, construction has ramped up in Boston. Nearly half of this year’s scheduled completions will be added in the fourth quarter, placing slight upward pressure on vacancy as units begin to lease. The influx of Class A apartments may increase the use of concessions in this asset class and moderate overall rent growth, particularly as the average effective rent for top-tier units remains above $3,000 per month. On the other hand, Class C units will likely generate an above-average rent increase as vacancy in the 2 percent band persists.

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