MARKET SNAPSHOT: Boston’s Strong Demographics Appeal to Apartment Developers, Buyers

Boston—The Boston apartment market has seen some positive signs, particularly with the creation of jobs and demographics of the city.

Of the nation’s largest cities, Boston has the highest proportion of 20- to 34-year-olds, and between 2000 and 2011, the number of residents between the ages of 24 and 30 increased 11 percent, reports Richard Robinson, CCIM, principal in ARA’s (Apartment Realty Advisors) Boston office.

The Boston-Cambridge-Quincy metro area reported a 7.1 percent unemployment rate in July 2011, according to the U.S. Bureau of Labor Statistics.

“It doesn’t get us back to 2007 levels, but it’s making up a large portion of the gap and reducing unemployment,” Robinson points out.

Average Class A occupancy was 96.4 percent in August, up from 95.9 percent in January. Robinson also notes that 5,300 units were delivered between December 2010 and July 2011, with most of them focused on the South Shore.

Average Class A rents in the Back Bay area rents $0.28 per sq. ft. since January. The average asking rent in this area, notes Robinson, is about $4.53 per sq. ft., so this is about a 6.5 percent increase.

More Class B and C properties are currently on the market than top-tier assets, Robinson tells MHN, adding that B assets are experiencing cap rate compression, as they are currently selling in the 7.25 percent to 7.75 percent cap rate range. Class A properties, meanwhile, are in the 5+ percent range.

The market is seeing interest from all over the country, notes Robinson, who adds that the biggest buyer pool is the private REITs for Class A properties, with the Class B properties tend to attract private developers and investors with an institutional partner looking for a higher yield.

The future for Boston is bright, notes Robinson. In addition to the strong rental demographics and the relatively low unemployment, the city has a diversified economy.

“We have such a diversity of industries, from healthcare, medical device, finance and energy technologies,” he tells MHN. “We have such a great diversity in terms of jobs that I think we’ll [rebound] better than most cities.”