Boston 1Q 2024 Market Report

MARKET SNAPSHOT

AVERAGE RENT

$2,789 1Q 2024

1Q 2024 RENT CHANGE

2.0%

OCCUPANCY RATE

95.7% 1Q 2024

ANNUAL OCCUPANCY CHANGE

-40 BASIS POINTS

TOTAL OPERATING EXPENSE ANNUAL CHANGE

5.8% (FEB 2024)

NET OPERATING INCOME ANNUAL CHANGE

5.9% (FEB 2024)

* Please note that these employment figures have been adjusted for seasonal variations and are based on Moody’s Analytics forecast as of January 1, 2024.

** Please note that these unemployment rates are estimates that have not been adjusted for seasonal variations, and they are derived from Moody’s Analytics forecast as of January 1, 2024.

KEY TAKEAWAYS

  • Balanced Supply-Demand: The supply-demand gap has nearly closed, with renters absorbing 1,369 units in the first quarter, which was nearly equal to the 1,389 units completed over the same period.

 

  • Robust Rent Growth: Boston’s average rent increased by 2.0% year-over-year to $2,789, surpassing the national average and ranking 13th among major U.S. markets for annual growth in the first quarter.

 

  • Investor Activity Grows: Investment remained strong in the first quarter of 2024, with volume exceeding $591 million—an 84% annual increase and coming in slightly above the past decade’s average first-quarter volume.

Supply & Demand

1Q 2024

1,369 Units

QUARTERLY DEMAND

1,389 Units

QUARTERLY COMPLETIONS

Annual Demand vs Completions

Demand Trends

In the first quarter of 2024, the Boston apartment market exhibited signs of a narrowing supply-demand gap. This marks an improvement compared to the same period last year, when first-quarter completions exceeded absorption by 61%, with only 1,297 out of 2,029 units absorbed. Of Boston’s 32 submarkets, 29 saw positive net absorption in Q1 2024, with Roxbury/Dorchester leading the way at 439 units.

Construction Trends

In the first quarter of 2024, Boston’s apartment inventory grew by 1,389 units, a 33% decrease from the previous year. This new supply was concentrated in only 12 of Boston’s 33 submarkets, particularly in Suburban Rockingham County, Roxbury/Dorchester, Brookline/Newton/Watertown, and Quincy/Milton/Randolph, each contributing over 200 units. Over the past year, completions were more evenly distributed across Boston’s submarkets. However, South Plymouth County and Roxbury/Dorchester remained the primary construction hubs, adding 831 and 830 new units, respectively, in the year leading up to the end of the first quarter of 2024.

Occupancy & Rent Trends

OCCUPANCY TRENDS

In the first quarter of 2024, Boston’s apartment market saw a slight 40-basis-point annual decrease in average occupancy levels, settling at a still healthy 95.7%. The most recent quarter over quarter period noted a more modest 10-basis-point decline, indicating a considerable slowdown in the rate of occupancy decline. The resiliency of occupancy levels reflects Boston’s strong market fundamentals.

Despite the overall downward trend in annual occupancy, levels remained stable quarter-over-quarter across submarkets, with only 12 showing negative changes. Impressively, 27 of Boston’s 32 submarkets maintained occupancy rates above 95%, and all but eight exceeded the metro average. The Suburban Rockingham County submarket had the highest occupancy rate at 97.6%, followed by Lowell/Dracut, Strafford County, and New Hampshire Beaches, each with occupancy rates above 97%.

$4,318

Average Monthly Mortgage Payment

RENT TRENDS

In the first quarter of 2024, Boston’s multifamily market saw a strong 2.0% year-over-year increase in average effective rents for new leases, reaching $2,789 per month. This growth significantly surpasses the national average of 0.8%, placing Boston among the nation’s top-performing large multifamily markets. Projections suggest a potential 3.0% annual rent increase by year-end, driven by stable occupancy rates and a slowing pace of new developments.

In the Brookline/Newton/Watertown area, rents averaged $3,230, with a 4.7% increase, marking the strongest rent growth among New England metro submarkets. A limited supply of new units has allowed landlords in most areas to gradually raise rents. Apart from Alewife (-0.7%) and Suburban Rockingham County (-0.8%), all submarkets experienced positive year-over-year rent growth, with 20 of the 32 submarkets recording above-average increases.

$2,789

Average Monthly Rent

Submarket Rent & Occupancy

Submarket Construction Pipeline

Sales Activity

Despite a challenging interest rate environment, investor interest in Boston’s apartment market remains strong. In the first quarter of 2024, single-asset sales of conventional multifamily properties reached $591.7 million, an impressive 84% year-over-year increase. Additionally, first-quarter sales volume was slightly above the 10-year historical average for this period. Overall transaction count also rose, with 24 properties changing hands compared to 14 a year earlier. This was the second-highest count in the past decade, only narrowly missing the 27 properties that traded hands in 2022. The buyer mix and type of properties involved in transactions have remained consistent over the past few years. Public and institutional buyers accounted for just over a quarter of the total transaction volume over the past four quarters, mirroring their share throughout the 2020s.

  • Pantzer Properties
  • DSF Group
  • UDR
  • AvalonBay
  • Brookfield AM
  • The Hanover Co

*Most Active Buyers and Sellers are based on the sale volume of apartment units.

TRANSACTION VOLUME


YTD Transaction Volume

Y-O-Y Change

Individual Transaction Count

Price Per Unit

Annual PPU Change

* Trailing 4Q average PPU

* Preliminary Data from RCA – Individual transaction $2.5M +

Income & Expense Analysis

Please note that the income and expense data presented in this section is sourced from third-party providers. Our firm does not provide any warranty or guarantee as to the accuracy or reliability of this information. We recommend that users exercise their own discretion and professional judgment when interpreting and utilizing this data.

Income & Expenses

Income AssumptionsValue / UnitYear Change (%)
Rental Income / Occupied Unit$2,579.506.4%
Recoverable Expenses / Occupied Unit$33.599.4%
Other Income / Occupied Unit$103.594.6%
Total Income / Occupied Unit$2,716.68 6.4%
Rental Income$2,417.505.9%
Recoverable Expenses$31.488.8%
Other Income$97.094.1%
Total Income$2,546.075.9%
Operating ExpensesValue / UnitYear Change (%)
Payroll$188.074.9%
Repairs & Maintenance$65.446.1%
Leasing$81.184.5%
General$41.463.7%
Marketing & Advertising$31.71-2.8%
Repairs & Maintenance$193.616.6%
Cleaning$45.247.6%
Roads & Grounds$32.542.7%
General$115.837.5%
Administrative$79.1211.2%
Security$15.3016.2%
General$63.829.9%
Management Fees$89.943.3%
Utilities$144.512.3%
Electric$47.413.1%
Gas$19.69-6.8%
Water/Sewer$77.414.4%
Real Estate & Other Taxes$264.381.7%
Insurance$58.7723.3%
Other Operating Expensees$22.95
Total Operating Expense$1,073.065.8%
Value / UnitYear Change (%)
Net Operating Income$1,473.015.9%

Market Outlook

Boston has demonstrated remarkable resilience amid a challenging economic climate, outperforming many coastal markets. As of Q1 2024, 13,685 housing units are under construction, with another 5,738 expected within the next year. Apartment absorption remains healthy, contributing to high occupancy rates and stable rents. Moreover, Boston’s apartment market remains robust due to ongoing economic growth. Massachusetts continues to draw residents, thanks to immigration returning to pre-pandemic levels. Despite high living costs and lengthy commutes deterring some, Boston excels at retaining talent from its world-renowned colleges.

Key economic drivers include the information, professional and business services, education, health services, and finance sectors. Major employers range from advanced biotech research leaders and universities like Harvard and MIT to financial institutions such as Fidelity. With strong industries and a highly skilled workforce, Boston is well-positioned for continued economic success.

Sources: MSCI; Yardi Matrix; Costar

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