Troy Boston/Photo courtesy of Equity Residential
Average asking rents for apartments in Greater Boston topped the $3 per square foot mark for the second straight quarter, and are expected to rise even further amid a strong employment market and moderate development pipeline.
Vacancies ended the second quarter at 5.4 percent, a slight decrease from 5.6 percent the previous quarter, Colliers reported. Average asking rents rose from $3 to $3.09 per square foot.
The region’s 16,000-plus units under construction represent a slightly above-average pace, but construction is likely to decline because of higher borrowing costs for developers.
“Stricter lending standards and elevated construction costs are making it harder for projects to pencil out, even with demand in the marketplace for units,” Colliers researchers reported. “Given the ongoing housing crunch, any construction slowdown could benefit existing assets.”
Class C properties have the tightest vacancy rate at 2 percent, a near record low.
At the high end of the market, the South Boston and Seaport submarket had the highest average asking rents at $4,442 per unit, according to the study using Costar data of rental properties with 25 or more units.
One of the region’s largest owners of class A apartment buildings recently reported strong rent growth in the urban portion of its 7,170-unit Greater Boston portfolio.
Equity Residential said average rents are now $3,477 at its 27 local properties.
On a same-store basis, Greater Boston rents have increased 8.7 percent in the first half of 2023, compared with the same period in 2022. The increase was the largest of any U.S. metro except for New York, where rents rose 13.4 percent.
“[Rent] is driven by strong demand across the [Greater Boston] submarkets with our urban properties outperforming our suburban ones,” Chief Operating Officer Michael Manelis said in a conference call with analysts to discuss the company’s second-quarter financials. “We continue to hear stories of tough commute times for suburbanites that are resulting from residents coming back to the city.”
