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Boston Apartment Rents Rise 11% As Vacancy Tightens

The last time Boston's apartment vacancy was this low, Paul Pierce and Kevin Garnett were still playing for the Celtics. 

Multifamily buildings in the Seaport neighborhood, including the NEMA apartment building on the left.

The vacancy rate in the Boston-area apartment market fell to 4.5% as of Dec. 31, according to a new Colliers report, its lowest level since the end of 2012. The report found that Boston's apartment market rebounded sharply in the second half of last year after the pandemic-induced slowdown. 

Apartment rents last quarter experienced an 11% year-over-year increase, the largest annual rent spike in the last 20 years, according to Colliers. Asking rents across the Greater Boston area averaged $2,457, and rents in Boston proper averaged $3,176.

"The apartment market is very strong these days," Colliers Research Director Jeff Myers told Bisnow. "The vacancy rate for apartments is fully recovered back below pre-Covid levels. If you’re an apartment landlord out there, you have to be really happy."

The submarkets with the highest asking rents per square foot, according to Colliers are South Boston/Seaport at $4.82 per SF and Back Bay/South End at $4.63 per SF. The report identified three specific buildings with asking rents above $5 per SF: NEMA in the Seaport, Pierce Boston in the Fenway and Proto in Kendall Square

"The most interesting rent stories to me are what’s happening down in those new towers rising in the Seaport," Myers said. "Generally speaking, those are going to be the most expensive apartment properties, not just today, but ever in the Boston metro history. They’re charging rents that haven’t been seen here before."

A graph from Colliers' report showing the Boston apartment market's year-over-year rent growth going back to 2001.

The tightening vacancy and rising rents have been driven by strong demand for apartments, with nearly 15,000 units absorbed last year in the Boston area, according to Colliers. Myers said this leasing has been driven by several factors: pent-up demand from people who didn't move during 2020; college students resuming in-person classes; job growth in the booming life sciences sector; and a lack of options for people looking to buy homes. 

"It’s a really tight housing market," Myers said. "To buy property here is also really expensive, and given the options, there’s a chance some of the folks leasing these higher-priced units might buy if there were a larger inventory of for-sale units out there. But there isn’t, so some of these folks are stuck in the rental market."

On the supply side, more than 80 new projects are under construction that would add more than 13,000 units in the Boston area, increasing the inventory by 6.2%. This is down from the development peak in 2019, when more than 20,000 units were under construction. 

Three large, under-construction projects that will add supply to the market are the 468-unit Park151 in East Cambridge, the 465-unit Ashlar Park in Quincy Center and the 451-unit Boylston Place in the Fenway.

Developers looking to start new apartment projects in Boston today face several obstacles, such as supply chain issues pushing up materials costs and the life sciences boom making land acquisitions more competitive. But Myers said the high rent growth, in addition to the strong investor demand to buy new apartments, should help them overcome those hurdles and make new deals pencil. 

He also expects rents to continue rising this year, though the annual rate of growth likely won't surpass 10% again. 

"I'd expect rent growth to moderate in 2022," Myers said. "It’s really hard to sustain double-digit rent growth in the marketplace. So I think there is a little bit of catch-up that took place to help that double-digit number come to fruition. However, landlords are still on healthy fundamental footing with sub-5% vacancy rates. So they should still be able to push rents in 2022."