Market data shows suburban rents have stayed relatively healthy amid a drop in the local student population that has left urban landlords struggling.
After years of being in the trendy, live-work-play driver’s seat when it comes to dictating the terms of urban apartment rentals in Greater Boston, multifamily building owners in the immediate Boston vicinity now find themselves scrambling to fill thousands of empty apartment units.
With many area colleges and universities conducting classes partly or fully online, the local student population has fallen at the same time as work-from-home policies at white-collar jobs are helping some young professionals decamp for apartments in the suburbs.
As a result, owners of multifamily dwellings are now offering once–unthinkable concessions to lure tenants, such as waiving the first month’s rent and security deposits, lowering minimal credit requirements, allowing pets in some buildings and renovating once–dingy abodes.
Believe it or not, some urban landlords are also now paying broker’s fees and actually lowering monthly rents, anywhere from 5 percent to 25 percent or more, according to real estate agents.
“It’s been a bloodbath,” said John Ford, owner of Ford Realty on Beacon Hill. “The dynamics have changed so dramatically.”
A Noticeable Shift
In late September, apartment listings data showed thousands of units are going unfilled in the city of Boston alone, Ford says.
Beacon Hill had 260 apartment units listed for rent as of late September, a once unthinkable number, Ford said. For other neighborhoods, it’s just as bad – the South End had 389 units available, the North End 210 units, South Boston 258 units and Back Bay 503 units. Numbers weren’t readily available for other neighborhoods, but Ford and others say just about every neighborhood in Boston is getting hit.
“It’s been very slow,” said John Puma, chief operating officer of Places for Less, which finds housing for renters in Boston, Cambridge, Somerville, Allston, Brighton and Brookline.
The drop in the number of college students returning to campuses this fall has definitely impacted the market, said Puma. But he notes that at least some young professionals are bolting city environments for the suburbs for pandemic-related safety concerns, while others facing economic hardships are searching for more affordable rents or leaving the rental market entirely by moving back in with relatives.
“It’s just been crazy,” said Puma, noting he’s seeing rent decreases in urban areas ranging from $300 to $500 per month.
But what’s been bad for urban landlords has been good for suburban owners of multifamily dwellings in eastern Massachusetts.
AvalonBay Communities Inc., which operates more than 10,000 apartment units in approximately 40 communities in Massachusetts, confirms that there’s been a noticeable migration of renters from the inner Boston area to the suburbs since the onset of the pandemic and subsequent economic downturn.
“Our suburban portfolio is currently outperforming our urban portfolio,” Kate Brown, vice president of property operations at AvalonBay, said in an email interview with Banker & Tradesman.
Brown didn’t provide data on the trend, with company officials saying the firm is limited in what it can say as the publicly traded firm enters its quarterly “quiet period” before releasing financial data.
But Brown did note that “job insecurity and economic uncertainty” – as well as increased remote working by employees and continued low mortgage rates that are luring record numbers to attempt to buy a home – “continue to drive turbulence in the Boston market.”
Uneven Landscape of Rent Decreases
In general, observers say rents and occupancy rates in suburban markets are holding somewhat steady amid the pandemic – and holding somewhat steady in some Gateway Cities outside Boston.
“It’s really a mixed picture,” John Schroeder, president and CEO of Haverhill-based Primary 360, a national real estate marketing agency that represents large multifamily-building landlords and developers. “Generally, the denser populated a community, the worse it is [for landlords]. People are definitely moving to less ‘urban-esque’ areas. The further you go out from Boston, the better it is.”
“It’s not a universal case of a softening market,” said Tom Hopper, director of research and development at the Center for Housing Data, which is associated with the nonprofit Massachusetts Housing Partnership.
Even gritty cities such as Brockton and Lawrence have not seen much of a hit to rents, Hopper said.
As for rent concessions in general, Zillow senior economist Cheryl Young said her data indicates that, nationally, about 30.4 percent of all rental ads in July offered some sort of concessions, such as a free month’s rent or waiver of security deposits. That’s up from 15.2 percent of rental listings offering concessions in February, before the coronavirus outbreak, she said.
In the Boston area, nearly 20 percent of all apartment listings offered concessions in July, up from only 6.7 percent in February. And that number may be higher today, now that September, a key month for college rentals in Boston, has come and gone and thousands of units remain on the market.
As for rent decreases, Zillow’s August data based on ZIP codes shows that rents were down about 4 percent in the Kenmore Square area near Boston University and 3.8 percent in Allston. But other, perhaps less student-dominated neighborhoods have seen steeper declines: Chinatown rents are down 8.5 percent, the Longwood Medical Area’s are down 6.2 percent, Harvard Square’s rents are down 2.8 percent and Kendall Square has seen rents drop 9.5 percent.
When Will It End?
The big questions moving forward: Are all these concessions and rent decreases working? And are tenants biting?
The statisticss indicate, in general, the answer is “not much” – for now. Thousands of units, including those in ritzy neighborhoods such as Boston’s Seaport, remain unfilled and are contributing to a major supply-and-demand imbalance, industry experts say.
Then again, Ford Realty’s John Ford says he knows of some tenants playing landlords off against each other, going back and forth in negotiations to see who will offer the best deal.
“It’s actually a great time to rent in places like Beacon Hill,” said Ford. “The prices haven’t been this good in a long time.”
How much longer will the current market last? No one really knows. It all depends on when the pandemic ends, perhaps via a new coronavirus vaccine, and when the economy starts to substantially improve.
“I think it’s going to last a while longer,” said Ford. “I don’t see it changing soon.”
