MARKET SNAPSHOT: TOD in Beantown’s Urban Core Remains City’s Bright Spot

By Erika Schnitzer, Associate EditorBoston—The bright spot in the near term of Boston’s multi-housing market will be the “urban core Class B product,” predicts Greg Willett, vice president of research and analysis at M|PF Yieldstar.Willett predicts the city’s transit-oriented development will outperform other building types. Meanwhile, he anticipates that “the struggles will be when you…

By Erika Schnitzer, Associate EditorBoston—The bright spot in the near term of Boston’s multi-housing market will be the “urban core Class B product,” predicts Greg Willett, vice president of research and analysis at M|PF Yieldstar.Willett predicts the city’s transit-oriented development will outperform other building types. Meanwhile, he anticipates that “the struggles will be when you get to the suburbs, where you have new product coming online and you have competition from the single-family market.”Most of the new supply that is coming online in the Boston metro market—approximately 5,000 units—is concentrated in the suburbs, Willett tells MHN.Occupancy in the metro is down 120 basis points, to 93.9 percent, which as Willett points out, is similar to the pattern in many other major metro markets. Because the city started with a “strong occupancy position,” it remains above the national norm.Rents have dropped only 0.4 percent, a considerably smaller correction than other major metros, notes Willett, adding that during the strong boom period, when most major markets had strong rent growth, Boston was more moderate. Willett attributes this to the amount of product on the market, which resulted in a lack of huge rent run-ups. Consequently, the “correction won’t be quite as severe.”Cap rates are averaging about 7.5 percent, though investors are willing to pay a premium for stable assets in the Brookline, Somerville and Cambridge submarkets—where assets are trading in the low- to mid-6 percent range—according to Marcus & Millichap’s 2009 National Apartment Report.Click here to read last week’s Market Snapshot on Baltimore.

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