BLDUP Update 06/07/21
Boston's Suburban Boom: Where Developers are Going Next
It’s no secret that Boston has been a magnet for new residents from across the world with its ever-expanding life science employment sector, world-class academic institutions, incredibly high quality-of-life opportunities, and history-soaked multiculturalism. A strong economy combined with a well-developed regional transportation system has led many people to settle in Boston’s suburbs, with dozens of historic perimeter towns and cities providing desirable urban settings without Boston’s cost.
Immediately west of the city, the suburbs of Newton and Needham have been attracting a range of development, from multifamily projects such as the Northland project to the development at Riverside Station, transforming the typically low-rise enclave. “We continue to explore opportunities to expand or enhance our portfolio in emerging submarkets,” says Mike Wilcox, SVP, Director of Leasing at Bulfinch. “A great example is the Needham-Newton area where we have seen a growing convergence of residential and commercial developments that over time have created a more sustainable ecosystem for employers seeking talent and individuals and families attracted to a thriving suburban setting.”
As a result of Boston’s persistent cost of living issues, many people opt for the suburbs as an affordable alternative to living in the core, and as a result, a large part of suburban development taking place are 40B residential projects. 40B refers to the state statute chapter 40B that allows local zoning boards to expedite multifamily approvals if at least 20-25% of the units have long-term affordability restrictions. On January 14, 2021, Massachusetts Governor Charlie Baker signed the Partnerships for Growth act into law, further strengthening the 40B statute and allowing zoning amendments and special permits to be approved by a simple majority.
Furthermore, the COVID-19 pandemic has upended the trend of growth in urban centers as lockdowns forced companies to work remotely and people began a home-centric lifestyle. “What you’re seeing now is a complete shift in mindset from city dwellers due to COVID,” said Maureen Haggerty, realtor for Century21. “As employers continue to realize cost savings due to allowing their employees to work remotely, employees are also now free to live wherever they want. That means they are coming from their 800-1,200 square-foot Charlestown townhouses to suburban communities like Stoneham, Wakefield, Reading, and Melrose with a whole lot of cash to put down.”
“Throughout the pandemic, Bulfinch signed several new lease agreements across our submarket portfolio, particularly in Newton-Needham, which reaffirmed our foresight for the area as an emerging hub for innovation and professional services,” Wilcox said. “We anticipate the trend of mixed-use development to continue across the submarkets throughout Greater Boston well beyond the pandemic as the 'future of work’ continues to take shape in alignment with the changing needs and desires of the workforce.”
The migration of people and multifamily investment to the burbs maintained Greater Boston’s insatiable appetite for lab and life science space, creating more and more pockets for clusters to form outside the immediate Kendall Square neighborhood in Cambridge.
"In the aftermath of COVID-19 we’ve witnessed a growing appetite among life sciences, industrial, and biomanufacturing users for space in the suburbs that can accommodate a wide array of potential uses. We continue to see development in cities outside of Boston, such as Waltham, Bedford, and Andover, that can accommodate the growing demands of these sectors" said Matt Daniels, Executive Managing Director at JLL. "These suburban investments offer excellent value for tenants, access to a world-class talent pool, and to New England's regional hubs of commerce."
The pandemic has also had an effect on unit layouts as a result of more demand for office/work from home space. The typical home size has increased, and the suburban demand for 3-bedroom multifamily units has also driven the designs of new projects. “As 40B rules and regulations changed, 3-bedroom units became a requirement at not less than 10% of a project’s unit mix,” said Michael Boujoulian, Managing Director of Alliance Residential to ULI Boston/New England’s digital panel discussion in April. “The pent-up demand from those barriers for 3-bedroom units has justified the creation of larger units.”
The outward flow of investment has hammered Boston’s core markets for multifamily units over the duration of the pandemic. According to the MHP Center for Housing Data, vacancy rates in Greater Boston spiked to 7.2% in 2020 while vacancies dropped in nearby Worcester from 3.25% in 2019 to 3.05% in 2020. Alewife in Cambridge saw rent reductions peak at 9.4% and Downtown Boston saw a year-over-year drop of 6.3%, with Back Bay asking rents contracting 6.5% and South Boston rents dropping 5%. The relief in pressure has opened up investment opportunities for developers and owners who otherwise would’ve been competing in a crowded, expensive market.
“In the Boston region, investment in suburbs only happens in tandem with a strong urban core. I still strongly believe in ‘the city’ and what cities have to offer those who live, work and visit them,” said Morgan Pierson, Director of Development for Berkeley Investments. “We’re already seeing a flow back to the core through restaurant patronage as well as rents stabilizing. With Boston’s near-term future looking positive, we are also bullish on the growth of many suburbs that are seizing this moment in a thoughtful and productive way, including communities as different from one another as Newton, Lawrence, Malden, and Watertown. Coming out of the pandemic, we think it will be important to have a both/and strategy of urban and suburban – the two complement each other.”
The race to invest in the existing product and develop new inventory is on, with developers picking their favorite Boston submarkets to put their shovels in the ground. “Our team has been focused on the emerging markets North of Boston, specifically gateway cities with strong commuter transit,” said Mike Procopio, CEO of The Procopio Companies. “We see significant growth in the Revere/Lynn/Salem/Beverly corridor, as well as the I-93 North submarkets because of their easy access and strong demographics for multifamily. We’ve seen strong demand among working professionals in Lynn with Caldwell leasing up, and look to build on that momentum in the spring when we bring Mosaic to the community. Sedna, our waterfront project in Beverly, was our strongest lease-up in several years -- despite Covid -- and showcased the pent-up demand in the Beverly-Salem market for high-quality boutique multifamily for working professionals as well as downsizing empty-nesters.”
“The explosion of the high-tech corridor along Route 128 has marked a major shift in Boston, and we are seeing incredible growth in the suburbs just outside the city,” said Boujoulian. “With corporations like Oracle, iRobot, Beth Israel Lahey, and major life science companies nearby, we’re particularly excited about our newest property, The Val, which opens next month in Billerica.”
Several communities across Greater Boston are seeing more and more projects with age-restricted units, serving an occasionally overlooked demographic. “We are seeing a lot of growth activity in Milton right now,” said Ellen Anselone, Principal at Finegold Alexander Architects. “Our project there is geared towards empty-nesters and young couples who want to be in the area and are attracted to the unit designs, many of which feature a study nook or small home office. It’s being designed with sustainability and energy efficiency at the heart, which are important to the developer and residents. In addition, we are noticing many developers selecting Milton for senior housing options, including memory care and assisted living. It’s a wonderful community with lots of suburban appeal, but with easy access to Boston.”
648 Canton Ave in Milton
The resulting development pushing further away from Boston has renewed interest in towns once thought to be far-flung from the city. “We think that we will see continued growth in these markets – capitalizing on easy access and multi-modal transit access and the flexibility that comes with the outer-urban core and suburban lifestyle,” said Mike Procopio.
“The lifestyle is different in the suburbs,” said Boujoulian. “It’s more relaxed, but also more elevated than it’s ever been. Our residents are getting a premier product that previously was only available downtown.”
“The novelties of city life had worn off when bars, restaurants, and cafes had closed down,” said Haggerty. “You also have no commute now. Why do you need to be in the city again? This had a huge impact on the thought process and desperation of city dwellers desiring more space and the freedom to go and be wherever they want. And here we are. Welcome to suburbia.”