Boston Rents Coming Down?
The boom in apartment complexes in Boston is having an effect on rental prices. Last month we reported that a spike in inventory was affecting single-family home prices, and now we’re seeing very early signs of it happening with apartments as well. The rental market is in for a correction over the next few years.
According to a recent article published in the Boston Business Journal, the market research company Axiometrics found rent growth decreased in Downtown Boston due to an increased supply of apartments.
The report showed that in the past year a major change was the decreasing rent growth in the downtown areas of cities and increasing rent growth in suburban submarkets.
For instance, in Boston annualized effective rent growth was 6.0% in the West/Northwest Suburban submarket in Boston in the third quarter, but dropped 1.1% in the Downtown area submarket.
More apartment complexes are being built, especially those appointed with luxury amenities such as loft-style floor plans, modern kitchens, and 24-hour concierge service.
Another report from the Boston Business Journal in January showed that in the next three years nearly 9,800 new luxury apartments and condos are planned to come on the market. The vast majority of these new units have been approved as rental apartments.
Yet many of the luxury units in the Downtown Boston area haven’t been rented out yet. Property owners are trying to stay competitive with incentives such as a month’s free rent or waiving fees for pets.
Back in April we wrote that the Pleasant Street Corridor in Watertown was seeing a large influx of luxury apartments being built. More than 700 rental units will be completed before the end of the year. This summer a few landlords of units on Pleasant St were not able to obtain the same rents that they have for the past two years.
Apartments Converting to Condo Units
With a large supply of unrented apartments, builders will want to see a return on their investment so it’s likely that many of these units will be converted to condos.
Condos are in high demand right now. More homeowners are looking for the lifestyle condo living offers such as proximity to work, shops, and cultural attractions.
More condos coming on the market would mean condo prices, which have been steadily increasing for months, will stop increasing and in some areas may finally come down . This would help the housing market as more condo buyers could enter the market resulting in an increase in home sales.
All of this will take a bit more time to be clearer to everyone but as far as we can see the writing is on the wall!
- Curbed Boston Boston-Area Apartment Complexes Offering Tenant Goodies
- Boston Business Journal Analysts: Downtown Boston apartment rents slide slightly even as rents surge in some suburbs; Boston’s luxury apartment boom
- Axiometrics Apartment Market Earns 4.0 for 3Q