Boston-based Taurus Investment Holdings acquired the 190-unit Wellington Parkside apartment complex in Everett this year for $56 million.

Across the New England region, demand for multifamily product of any kind has been incredibly strong in 2017. From Portland, Maine to Stamford, Connecticut there are strong fundamentals with year-over-year rent growth in almost all submarkets.

Transaction volume was down approximately 14 percent for the Boston metro area as compared to the same period a year ago, but it’s not because of poor fundamentals or forecasts, but simply due to a lack of investment opportunities. All in all, the market’s strength is unsurprising when we look at the bigger picture: low unemployment, good investor demand and companies flocking to Boston looking for talent.

In many ways the market has only heated up since 2016, particularly in the value-add space as investors look to manufacture revenue growth through property improvements. We’re on track for a record-breaking year in the multifamily market. Here’s what we’re looking at as the year comes to a close:

A Strong Economy Drives Demand

Boston’s diverse economy is built on education, health,care, life science and technology. Massachusetts is even outpacing the country as a whole, according to the Bureau of Economic Analysis, which means that attracting and retaining talent will continue to be a challenge for employers. Competition is fierce, and the office market is incredibly tight. The high number of job openings and a low unemployment rate of just 3.5 percent statewide illustrate that Boston needs to continue to draw young, talented workers to ensure growth.

This is good news for owners and investors, whether they’re concerned with luxury towers downtown or workforce housing near burgeoning employment districts. Demand hasn’t let up. In fact, Class B and Class C workforce housing has the strongest year-over-year rent growth due to demand. With a shortage of good sites zoned for multifamily development, the market is only going to become more competitive.

Market Competition Won’t Let Up Soon

The lack of inventory available to multifamily investors has resulted in unprecedented aggression amongst investors who have put on their game faces in order to successfully acquire a new asset. Investors feel good about the long-term growth prospects and demand drivers in the region, and are gearing up for a fight when a building comes on the market, particularly in the urban core, as it may not be available to acquire again for decades. With even fewer acquisition opportunities expected for 2018, don’t expect this aggression to let up in the near future.

Biria St. John

With the slowing of rent growth in some of the urban core markets, investors have turned their attention to other opportunities where they generate better returns. Value-add as a tactic has already been on the rise over the past few years, as owners find that investing in a property by making upgrades or adding amenities can manufacture revenue growth contribute to significantly higher yields.

Cliffside Commons in Malden in a great example of a property where there is significant potential for adding value. By making upgrades and adding amenities, owners are repositioning their properties at the top of the field and generating higher rents. However with this competition for assets, prices have been bid up and initial yields have dropped, so it is imperative that investors are able to achieve the projected rent growth in order to achieve the desired overall returns.

What 2018 Holds For Multifamily

It’s clear that a strong economy is bolstering competition in the multifamily market, where demand will continue to intensify as Boston courts new employees and retains current students. Once thought to be impossible in Boston, inward migration is happening and the quality of life that Boston offers makes it a place where individuals – and therefore companies – want to be. Whether moving from the outer suburbs or across the country, any companies that announce a new Boston headquarters in the coming year will shake things up and lead to an increase in demand for housing across the entire region.

Investors should also be keeping an eye on news out of Washington, D.C., as once the tax plan is unveiled it will be clear what the impact is to the multifamily market and affordable housing. Separate from the tax plan, financing options are still an important factor in any predictions regarding the 2018 multifamily market. Investors have continued to see an abundance of financing options, but the Treasury yields are a key metric that will be under close watch as the end of the year approaches.

Even with some uncertainty, all signs point to a record year and continued demand within New England’s multifamily market. It’s an exciting time to be an owner or investor, and the competition means that there will continue to be new opportunities – whether for conversion of other building stock, or for upgrades to infrastructure to better serve a growing regional workforce. Investors are paying close attention and are getting scrappier than ever, ensuring that 2018 will be an even more exciting year for multifamily.

Simon Butler and Biria St. John are vice chairmen and partners at CBRE/New England.