Boston

Demand Spreads From Central Boston

As Deliveries Begin to Arrive in Same Areas

Employment Trends
Absolute Change Y-O-Y % Change In pursuit of top talent, technology companies fuel housing demand.
60 4% Boston’s economy continues to be driven by the considerable intellectual
capital of its workforce. Premier universities including Harvard and MIT add
Total Nonfarm Jobs (thousands)

to a highly skilled labor pool, drawing prominent employers to central Boston

45 3%

Year-over-Year Change
and Cambridge in particular. Facebook recently announced plans to relocate
to a larger office space in Kendall Square, where Google also intends to open
30 2%
an office within the next few years. Employment and scholastic opportunities
in the submarket foster strong housing demand, pushing the average effective
15 1% rent above $3,000 per month. Rental rates are similarly high in Intown
Boston and across the Fenway/Brookline/Brighton area. Higher living costs
0 0% have prompted some renters to look to more affordable neighborhoods
15 16 17 18 19* nearby, including in East Middlesex County and Southwest Boston, where the
average payment can be $1,000 less.

Newly completed developments key to meeting investment demand.

Boston’s historically difficult permitting and planning process, which keeps
Housing Affordability Gap supply additions below the national rate, is one of the primary reasons
Mortgage Payment Effective Rent
institutional capital considers the market an excellent acquisition target
$3,400 for long-term holds. Yet, because so many owners hold for the long term,
demand for institutional-quality assets far outstrips the limited number
of properties that come to market for disposition each year. Sales of $20
$2,800
million-plus properties have been trending upward over the past 12 months.
Monthly Payment

Helping increase sales activity has been several recently completed assets
$2,200
trading hands. Developers capitalized on aggressive cap rates that in a few
cases reached the low-4 percent range for intown urban locations. From 2015
$,1600
to 2018, 94 properties with 100 units or more were completed in the market.
While many of these new properties will remain with the current owner to
$1,000 take advantage of the long-term market fundamentals, the highly attractive
10 11 12 13 14 15 16 17 18 19** pricing from the latest sales should give some owners the justification to
pursue disposition at this time.

Supply and Demand

Completions Absorption
10.0

7.5
22.4% 2019 2Q share of local population
Units (thousands)

between 20 and 34 years old

5.0
2018 population 25+ years old with a
44.9% bachelor’s degree or higher
2.5

0 $495,768 2019 2Q median home price

15 16 17 18 19*

* Forecast
** 2Q
Sources: IPA Research Services; RealPage, Inc.

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 Boston

2019 Investment Outlook

Supply’s movement from 4 to 2 over the past six months stands out as a Key Performance Index
risk in the Key Performance Index. Demand held steady and rent growth 10
moved up two notches but supply could negatively affect the market
going forward. 8

Liquidity remained steady at 6 since the beginning of the year as demand 6

for properties continues to outstrip the supply of listings. Yield, however,
did move up slightly to 4, reflecting a quality change of recent sales. 4

0
Note: The Key Performance Index provides a metro-level relational benchmark scaled from 1-10 for
five key metrics. Supply Demand Rent Liquidity Yield
Growth

2019 Midyear Market Forecastv Vacancy By Class

Class A Class B Class C

NMI Rank 5 6%

5%
Vacancy Rate

Employment Metro 1.1% 4%

30,000 jobs U.S. 1.3%

3%

2%

Construction Metro 1.9% 07 08 09 10 11 12 13 14 15 16 17 18 19*

as % of inventory U.S. 1.8%

z
Vacancy Metro 4.5%
U.S. 5.5% Rent Growth By Class
Down 20 bps
10-Year Average 2019 Forecast

8%

Rent
z Metro 5.8%
$3,408 per month U.S. 3.2% 6%
Rent Growth

4%

2%
Investment Deals: 30
3-yr. avg. activity Volume: $2.3 billion
0%
$20+ million
Class A Class B Class C

* Forecast zClass A
Arrow reflects trend compared with 2018
v

Sources: IPA Research Services;

CoStar Group, Inc.; RealPage, Inc.; Real Capital Analytics

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