The inner suburbs surrounding Boston and Cambridge are rapidly changing. Their proximity to the job centers of those two cities, thanks to mass transit and highway access, has been a long-time boon. Now, Millennials have turned their attention to these historically working-class cities.
Lower costs of land and construction allow developers to bring new apartment rentals on line at a lower rate – at or below $3 per square foot in many instances – than in either Cambridge or Boston. Far more renters can afford to live in these areas and, in fact, the cities of Chelsea (12 percent) and Everett (10.5 percent) have had population growth far in excess of the statewide average (3.8 percent) or in the city of Boston (8 percent) since the 2010 Census.
Developers have taken notice of this growth, bringing nearly 2,000 units on line since 2006 in those two cities alone. Many offer average effective rents per square foot in the $2.50 range for product delivered since 2014 and very little in terms of concessions, per data from CoStar. Even those still in lease-up are not offering concessions. This affordability has been a major driver of population growth.
Meanwhile, these inner suburbs are producing their own economic opportunities, further fueling population growth. Take Assembly Row in Somerville. This mixed-use redevelopment of a former assembly plant has been transformed into a retail destination with MBTA Orange Line service, also housing thousands of residents and the new offices of Partners Healthcare where 4,500 people will work. Partners consolidated and centralized its disparate office locations throughout the Boston area there for its long-term home. The delivery of this new building was the driving force behind the strongest quarterly office absorption ever recorded in the inner suburbs submarket – over 1.1 million square feet in the third quarter. Submarket vacancies ended the period at 13.7 percent. Along with the FBI’s new regional headquarters in Chelsea and continued development at Boston Landing, the inventory of this submarket grew nearly 23 percent last quarter alone.
Just across the Mystic River from Assembly Row, the area’s largest construction project, the Wynn Casino, is underway in Everett. Valued at more than $2 billion, this destination casino is creating ripple effects throughout the broader Boston market, making construction labor scarce because so much skilled labor is employed on the project. Upon its completion in 2019, it will employ thousands of workers permanently, putting Everett on the map of the region’s hotel, gaming, entertainment and nightlife scene. Similar to Assembly, this is another redevelopment of former industrial space. Because rents support repurposing space, we see up to one million square feet of outdated industrial space coming out of inventory annually to make way for other product types, primarily residential.
Public Transit Investment Spurs Growth
The real estate community should pay attention to transit planning outside the city limits of Boston and Cambridge. For example, future investment in public transportation from the Green Line Extension to Somerville and Medford (adding or relocating, in the case of Lechmere, seven stations) and the Silver Line Gateway project, are likely to create new areas of growth. The latter will connect the Silver Line to East Boston (and the Blue Line) and back into Boston (at the Red Line) at South Station, and offer better access to the tech hub of the Seaport. Chelsea’s commuter rail station will be relocated, while several new stations with Silver Line service will be added.
Transit-oriented development has proven to be a successful city planning tool as well as a viable real estate investment. Vacancies near transit tend to be lower, while rents are higher. Improved access to job centers fuels population and income growth, and in turn, supports additional housing and broader economic growth. The population base of the inner suburbs area is already growing quickly; add better transportation access on top of its new economic drivers, and the inner suburbs look primed to continue their torrid growth. Urbanization, redevelopment, mixed-use projects and transit accessibility are all hot topics in the real estate market today, as well as across Boston. The inner suburbs are set to benefit from all of them.
Aaron Jodka is director of research for Colliers International | Boston.
