Multi-family Sector Stable, Poised for Growth in Boston Metro

While commercial real estate analysts have a cautious outlook these days, the Boston multi-family sector is holding steady and poised for growth. According to a first quarter 2023 report by Colliers, Boston’s multi-family vacancy rate is in line with 10-year historical averages, with asking rents remaining stable. However, vacancy rates have ticked higher during the past year, moving from 4.2% to 5.6%.

The rise in Boston multi-family vacancies stems from an abundance of supply. 8,000 new units have come to market since 2022. Another 17,000 units are in development. Meanwhile, investors and developers have been affected by rising interest rates, which have softened sales prices and transaction volume.

Despite the economic challenges of the day, the Boston Metro multi-family sector is in better shape than most areas of the country. A report by CoStar Group shows U.S. multi-family residential sales at the lowest level since 2009. Investment in multi-family projects have dropped 74% on a year-over-year basis. Financing multi-family properties and new development is becoming expensive, if not outright difficult, as banks tighten loan criteria.

This is setting up an under-supply of rental units in the future, particularly in the Boston Metro. The National Multifamily Housing Council predicts the U.S. will be 4.3 million apartments short of housing demand by 2035. But a national housing shortage could hit much sooner in high-demand areas, affecting rental markets by 2025. This is due to the lengthy process involved in planning and developing multi-family projects, which can take years to bring new units to market.

Boston Metro housing demand is expected to remain strong for the foreseeable future. While no city is immune from macroeconomic headwinds, Boston has the advantage of a highly-educated workforce, a diverse economy, and world-class institutions of higher learning. Any widespread disruptions to employment stability could impact the multi-family sector, but in the long run, Boston has proven to be a resilient commercial real estate market.

When you are ready to begin, relocate or expand your business, team up with the Jay Nuss Realty Group, LLC! Whether you are thinking of buying, leasing, or investing in Boston Metro commercial real estate, we can help you find the ideal property!

Contact us today for expert guidance!