Greater Boston’s Impressive Job Growth Surges Multifamily Housing Permitting
In recent years, Boston has experienced far-above-average job and population growth, putting increased pressure upon the Boston area’s housing stock and resulting in the historic development boom we are experiencing today. These shifts in the demand and supply of the space market have had major effects on rents and condominium prices, which have increased to levels previously unheard of. Long gone are the 1970s, when one could rent an apartment in South Boston for under $100 per month. Even 1995’s citywide median rent for a two-bedroom apartment, $825, is a price unheard of in today’s market. Today, two-bedroom rents in Boston average over $3,200 per month, emphasizing the increased desirability of Boston’s housing stock. Developments such as the South End’s Ink Block and South Boston’s Washington Village have sprouted in areas previously devoid of residential presence, as the City of Boston has scrambled to supply enough housing for the stream of workers moving in.
Above: A locus graphic of Ink Block, the first residential development in the South End’s New York Streets neighborhood since its’ 1950s razing.
In recent years, leading employers such as General Electric, Reebok and New Balance have chosen Boston to house their headquarters, seeking to leverage Boston’s cutting edge talent. Major technology and life sciences players such as PTC and Alexion Pharmaceuticals have also recently announced their decisions to move their headquarters to Boston, and nationwide corporations such as Facebook are opening large new offices here as well.
Boston has arguably the highest concentration of top universities in the country, including Harvard, MIT, Northeastern and BU. These institutions attract ambitious young adults, many of whom are choosing to stay in Boston as more companies plant their roots here. With the resulting wider selection of jobs, more students have reason to stay here after graduation. Between 2014 and 2015, Boston experienced a 2.7% increase in jobs per the Boston Planning & Development Agency (BPDA), outperforming both Massachusetts and the nation. Over the same period, Boston increased in population by 50,000, or 8%, more than all of the previous three decades.
The strength of Boston’s economy has grown to levels even higher than before the Great Recession of 2008. Per the Boston Planning & Development Agency (BPDA), Boston had a total of 757,344 jobs in 2015, a 10.5% increase from 2007’s pre-recession peak of 685,686. More recently, in the 12-month period ending Q3 2017, Boston Metro Area employers increased total employment by 52,500 jobs, or 1.9%, led by the education and health services sectors, which added 18,000 workers, and professional service related firms, which created 11,400 jobs.
Above: 121 Seaport, a soon-to-open office tower in Boston’s burgeoning Seaport District that will be home to the headquarters of PTC and Alexion Pharmaceuticals.
With so many more people moving into Boston, both rents and occupancy have increased significantly, leading to more cash flow in the asset market, increased property values and an overall riper appetite for development. Between 2015 and 2016, according to the American Community Survey, median gross residential rents in Boston increased by 4.1% from $1,432 to $1,491 per month, and the City’s homeowner and rental vacancy rates were estimated at just 1.4% and 3.1%, respectively, in 2016, lower than those of New York (2.1% and 3.6%).
Above: Hillside, an upcoming 60-unit apartment building in Quincy being developed by Boston Property Ventures.
The cost to purchase housing in Boston is also increasing rapidly. Per the most recent Greater Boston Association of Realtors (GBAR) report, median single family home and condominium prices have increased 8.2% and 6.6%, respectively, since last fall. Median prices have reached $568,000 for single family homes and $511,525 for condos, compared to $525,000 for homes and $480,000 for condos last fall.
In order to meet the increasing demand for housing, the City of Boston has moved to permit the construction of thousands of new housing units. Upon assuming the post of Mayor of Boston in 2014, Mayor Marty Walsh proclaimed that by 2030, 53,000 new housing units will be constructed in our city. In the third quarter of 2016, the City issued permits for the construction of 1,565 new or converted residential units per the BPDA, representing a 44% increase relative to the third quarter of 2015, when 1,090 permits were issued. In 2016, the BPDA Board approved 7.9 million square feet of new housing, representing total of 7,868 housing units across the City. As a result of the surge in new residential development, vacancies actually rose by 0.3%, up to 3.4%, in 2017 per Marcus & Millichap’s Q4 2017 Multifamily Market Report. Yet even so, Boston’s average effective rent will climb 2.6% in 2017 to $1,975 per month.
Above: Brookside at 999 Hancock, a recently-completed 53-unit condominium building in Quincy developed by Boston Property Ventures.
Boston’s boom has influenced smaller cities around the region, where new buildings are being built in record numbers to address low vacancies in the Greater Boston Area. In the Boston-Cambridge-Quincy area alone, from November 2016 through October 2017, 13,922 new private housing units were authorized per Federal Reserve economic data, Moreover, per the Marcus & Millichap multifamily report, 8,900 units were completed in the Metro Boston Area in 2017.
Multifamily buildings further from Boston, such as Boston Property Ventures’ recently completed Brookside at 999 Hancock condominiums in Quincy, have provided needed capacity to help accommodate the increase in demand for Boston housing. It has become clear that more such buildings will be necessary in the future. According to the City of Boston’s Imagine Boston 2030 outlook, an average of 1.3% annual job growth is expected in Boston, which will put even more pressure on Boston’s housing stock. In addition to building dense housing developments within Boston, developing housing in peripheral cities such as Cambridge, Somerville and Quincy will go a long way towards ensuring that the region has enough housing to sustain its’ impressive growth trajectory and house the people who are helping make Boston a worldwide innovative leader.
Boston Property Ventures >>