Archstone Boston Common, a 420-unit luxury apartment high-rise in the city’s Downtown Crossing area, is offering one month’s free rent to tenants who move into select units by April 15.

With thousands of new apartments becoming available in Boston and in areas north and south of the city in recent months, renters appear to have the upper hand.

But some industry watchers say they expect the apartment market in most parts of the Boston metro area to move forward at a healthy pace as occupancy and rental rates remain fairly steady or even inch up.

“Rents are actually starting to grow again,” said Stephen White, markets team manager for Property & Portfolio Research, a Boston-based real estate research firm.

First-quarter rents and vacancy rates in and around the city will be about the same as last year’s fourth quarter, predicted White.

The average rental rate in the city stood at $1,604 during the fourth quarter of last year, almost 3 percent higher than a year earlier, and the vacancy rate hovered at 5 percent, slightly lower than the previous year, according to Property & Portfolio Research.

In the Boston metro area, including Worcester County, the average rental rate was $1,463 in the fourth quarter, up 2.3 percent from the same period in 2005, while the vacancy rate was 4.9 percent, down from 5.1 percent a year ago.

The rent increases come after rents fell in 2003 and 2004 and remained flat throughout 2005 before climbing last year, White noted.

Property & Portfolio Research has not completed its first-quarter forecast but White said rents and vacancies aren’t likely to differ greatly from fourth-quarter conditions. The firm expects the Boston market to outperform the average total return for the 54 apartment markets it tracks and is recommending the region to some of its investor clients.

The downturn in the home sales market may be helping, as some renters have held back on purchasing with the belief that prices will continue to fall, according to some observers.

Another factor benefiting the apartment market is that the region hasn’t experienced the rapid pace of building seen in other parts of the country like California, Arizona and Florida, which have a glut of new developments, according to White.

Permitting in Massachusetts is a difficult and lengthy process, which tends to restrict supply, and land availability is limited, he explained. In addition, developers in recent years were mostly focused on building condominiums or converting properties into condos – reducing the overall inventory of apartments. “We’re starting to see the benefits of that,” said White.

Still, more than 5,000 apartments came online in and around Boston last year and another 4,532 units are expected to become available this year, according to Property & Portfolio Research.

“Last year was the largest delivery of units in 30 years in the state of Massachusetts,” said Chris Reilly, an area vice president of Equity Residential, a national development firm that owns and manages the 1,175-unit Charles River Park and is building another 310 apartments in the West End. “Most of the units have been inside the [Interstate] 495 belt.”

With such a significant number of newly built apartments becoming available, some property owners have been offering concessions – including rent-free months – to attract tenants. Even Archstone Boston Common, a 420-unit luxury apartment high-rise in the city’s Downtown Crossing area that opened late last year, is offering one month’s free rent to tenants who move into select units by April 15, according to Archstone’s Web site.

In some markets north and south of Boston, where vacancy rates are as high as 7 percent, landlords are scrambling to draw and retain tenants with enticing incentives – whether it’s several months of free rent or other types of discounts.

In those submarkets, “there will be bargains for quite some time,” predicted Reilly.

Some say those concessions will start to disappear by May when activity traditionally picks up. But Lawrence Fisch, president of Boston’s Preferred Properties – which handles rentals in Hub neighborhoods like Back Bay, South End and Fenway – said he’s noticed year-round concessions at 70 percent of properties.

“There’s still a lot of units out there so landlords are consistently working hard to provide a high-quality product at a reasonable number,” said Fisch.

Analysts are watching the condo market, fearing that a plunge in prices could force some of those units into the rental market.

“We keep a fairly close eye on the housing market. The condo market has held up reasonably well so far,” White said.

Encouraging Signs
Bay State condo prices haven’t declined as much as single-family home prices. The median selling price for condos sold in January and February – the most recent months available – was $265,000, almost 2 percent lower than the same months last year, according to The Warren Group, parent company of Banker & Tradesman. Condo sales slipped a modest 0.2 percent during that period – to 3,589 units sold this year compared to 3,595 during the first two months of 2006. In comparison, the single-family home price fell 3.8 percent to $308,000.

During the winter months, it’s difficult to gauge the health of the apartment market in New England because the number of renters moving in and out of apartments is typically low, according to Reilly.

But Reilly has seen some encouraging signs. He said there was a significant pickup in traffic at Equity Residential’s properties during the first quarter.

“We had more people looking for apartments in 2007 than in any quarter since early 2000,” said Reilly.

Another promising sign, according to Reilly and others, is the improving job market.

Thomas N. O’Brien, managing director and executive vice president of JPI – a Texas-based apartment developer that sold a 301-unit complex in Dedham for $76 million in January – said the addition of financial services jobs and other types of well-paying jobs in Boston, Cambridge and points west has helped apartment rentals and given landlords the confidence to raise rents.

O’Brien said some new projects like Archstone Boston Common are achieving higher rents than expected. Asking rents for units at Archstone Boston Common that were advertised online last week ranged from $2,340 for a 550-square-foot studio to $5,475 for a 1,540-square-foot apartment.

“I think every landlord in town would say they felt empowered to push rents a bit,” he said.

But O’Brien acknowledged that the apartment “supply is fluffy” north and south of Boston and that landlords in those areas aren’t in a position to aggressively increase rents.

“There still are some units that need to be absorbed,” he said. “If you have a good product that is located close to good transportation infrastructure, near a decent employment base, you’ll do fine.”

According to O’Brien, the most important factor affecting the rental market is the availability of capital.

“This is a market where a tremendous amount of capital is in the market competing for purchase transactions,” he said.