Across America, multifamily lending volumes are up 40 percent, and locally many banks have either already increased their lending to the asset class or say they plan to. iStock photo
Multifamily has become the almost last asset class standing when it comes to ground-up commercial development in Massachusetts, and banks are increasing their involvement in the sector accordingly.
Recent research by commercial brokerage CBRE found nationwide multifamily lending volume was up 40 percent year-over-year, primarily driven by increases in non-agency loan production from banks and life insurance companies.
In Massachusetts, for example, Eastern Bank increased its multifamily balance by 20 percent year-over-year according to its first-quarter earnings presentation.
“The Greater Boston market, from both a rental and for-sale housing standpoint, is significantly supply starved,” said Matthew Osborne, Eastern Bank’s executive vice president and chief credit officer. “While the unfortunate by-product of this is increased affordability challenges, it does drive a more attractive investment and lending profile when compared to other asset classes due to its strong demand and relatively higher barriers to entry.”
Other publicly traded local banks noted increases in multifamily lending volume in their earnings reports. Rockland Trust increased its from $1.88 billion in the first quarter of 2024 to $2 billion in the first quarter of 2025. HarborOne Bank increased its multifamily balance by 25.95 percent.
After a brief dip in multifamily lending due to a lack of production, Cambridge Savings Bank Senior Vice President Aidan Hume said that CSB plans to be more active in the market. Leader Bank executives said that the bank has increased its multifamily lending capacity.
Why? Bankers interviewed for this story say they’re all being attracted by the sector’s promise of stability.
Multifamily Has Structural Advantages
Multifamily has become such a low-risk investment due to a collision of an unstoppable force and a currently-immovable object: the innate need that humans have for housing and the lack of housing production in Boston.
“Investors are gaining more clarity (and a growing conviction) for strengthening fundamentals,” Matt Vance, Americas head of multifamily research for CBRE, said in an email. “Looking ahead, as rent growth recovers (even in the most negative of markets), renter demand remains strong, a dwindling supply pipeline, and the Fed—who is not posturing to raise rates without significant reason to—buyers recognize an opportunity to invest in what they feel is the beginning of the next appreciation cycle.”
With a slowdown in multifamily project completions after a small, pandemic-era boom, rental market observers and investors all generally expect Boston apartment buildings will enjoy continued rent growth for the near future.
“There’s a housing crunch in our market. That’s not going away anytime soon and without properties breaking ground at a fast enough rate, what’s going to happen is that landlords are going to continue to find themselves in a favorable position, assuming the economy doesn’t collapse…to push rent” increases, said Colliers Boston Research Director Jeffrey Myers.
Lenders and investors are assuming rents will grow a steady 2.7 percent at core assets and 3.1 percent at value-add assets over the next three years, according to CBRE. Zeroing in on Boston, CBRE research says the market’s rent growth sits at 3.5 percent and 4.5 percent.
“Rent growth plays several key roles in how buyers, lenders, and sellers view real estate performance,” said Vance. “Higher rent growth means higher returns.”
Could Lenders’ Interest Cool?
Office still remains the dreaded sector in CRE, but multifamily market didn’t leave the pandemic entirely unscathed, either, said Leader Bank Chief Lending Officer Matthew Pierce.
“That was the first time in 25 years that I saw such a weakness in that book of business because where we’re located, just by default, we’re very concentrated and relying on businesses that come out of the universities,” he said. “We’re just north of Boston, so Aug. 31 is the biggest turnover date in Boston.”
The impacts of rent freezes and remote schooling and work had an impact on the entire banking industry. Unless another once-in-a-century pandemic occurs, Pierce believes that multifamily loans will continue to perform well.
Sam Minton
But there could be reasons to expect a slight cooling in the appeal of multifamily development and investment deals in the coming quarters.
Massachusetts is currently lagging the nation in job growth, and actually lost jobs on a year-over-year basis in the first quarter according to state employment data.
“If we start losing jobs, as we actually did on a year-over-year basis as of the end of the first quarter, that’s something that could stall out some of the demand that we had been seeing, and lay on potential absorption,” Myers said. “I don’t know that it would totally disrupt fundamentals in such a serious manner as to make it not investable, but it’s something that could certainly lay on folks’ mind if they were looking at the property type six months from now.”
Similarly to job growth, the Trump administration’s drive to slash federal health and biotech research dollars could hurt the multifamily market, said Bob Brown, Brookline Bank’s head of commercial real estate lending.
