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Apartment Owners Reckoning With Long Recovery In Shifting Housing Market

The owners of Boston's apartment buildings are hoping renters return to the city soon — especially as schools look to bring students back in the fall — but more than a year into the coronavirus pandemic, they still find themselves competing for a dwindling renter pool, facing rising supply.

Average one-bedroom rents in Boston, among the nation’s highest, have fallen 16% in the past year. Suburban landlords, attracting apartment hunters in search of cheaper, less-dense living, have thrived, with some towns recording double-digit rent increases.

The Bower residential complex in Fenway, overlooking the Massachusetts Turnpike.

Combined with a peak of more than 8,000 units delivering this year and a hot single-family housing market, urban landlords are feeling the pressure to remain competitive with tenant-friendly deals. Multifamily leaders, cautiously optimistic of a post-pandemic return to the city, say a full recovery still feels a ways off.

“Tenants are realizing that there are a lot of opportunities and a lot of deals that they can find right now,” Senné Managing Director of Property Management Kate Pattison said. “That’s kind of something that’s affecting the market.”

The average one-bedroom rent in Boston sits at $2,090, a decline of 16.4% since last year, according to Zumper. Average two-bedroom rents fell 10% to $2,600, slightly less than Cambridge and Brookline.

Rents near Boston’s busiest downtown transportation hubs remain depressed. Average rates for apartments near four downtown MBTA transfer stations have declined more than 23%, while rents near suburban stations in Quincy and Newton have risen slightly.

Approximately 8,300 units were expected to deliver in the first quarter of 2021 alone, after just over 7,000 apartments opened in 2020, according to Yardi Matrix. Boston, the nation’s fourth-most-expensive metro, saw an exodus by renters to the suburbs as offices, schools, restaurants and entertainment all endured pandemic restrictions.

Greater Boston’s housing market has also heated up significantly, fed by low interest rates, recovering unemployment and a demographic rise in people in their early 30s looking to buy.

Demand for urban living hasn't entirely subsided, but rental landlords also are increasingly finding themselves competing in a market where residents are looking more at for-sale housing. The median condo sale price hit an all-time high in February of $597K, according to the Greater Boston Association of Realtors, a 3.1% increase year-over-year, even as some condos are selling for under their asking price.

The increased competition has led landlords to offer attractive deals like multiple months of free rent at complexes including some of the city’s swankiest towers. The rent-free offerings will likely stick around, although it is hard to say for how long, Pattison said.

“Tenants aren’t dumb,” said Pattison, who manages more than 1,200 urban and suburban units for Senné. “They know, they see the market, they see what people across the street are offering.”

The Green Cities Co.’s Bower complex in Fenway.

Developers of downtown residential projects have responded in different ways. Millennium Partners pivoted last June from luxury condos to apartments at massive Winthrop Center, while The Hudson Group in February nixed hotel plans in lieu of condos given the hospitality industry’s own struggles.

Fortis Property Group, the New York developer behind the rising 47-55 Lagrange St. tower, recently announced plans to sell their 148 units as condos rather than apartments. Representatives for FPG didn't respond to requests for comment. The company is seeking approval at a Boston Planning and Development Agency public meeting about the project Thursday evening.

Owners of properties with both condos and apartments have had a front-line look at the market dynamics. Lendlease General Manager Nicholas Iselin said the firm’s East Boston Slip45 condos have 113 of 114 units under agreement, while the apartments have felt the market's blow.

"We definitely saw a migration from the apartments and that was for two reasons — one, folks moving back in with their parents or getting out of the city, and international students went back," Iselin said. "That was a little bit of a dent there."

In the first quarter of 2021, 32% of Boston renters searched for homes outside of the metro, an increase from 20% a year ago, according to Apartment List’s Renter Migration Report. In a slight positive for urban landlords, 18% of renters in nearby suburbs looked into Boston, a rise from last year, according to Apartment List.

Lendlease's Clippership Wharf complex in East Boston.

Bower, a 321-unit Fenway complex, opened last August amid the beginning of the rent free fall. The complex is offering up to two months of free rent for new leases, and developer The Green Cities Co. said it has seen a “significant increase” in leasing activity in the past month, bringing the apartments to 47% leased. Green Cities Managing Partner Kelly Saito said he believes in a return to urban living as occupancy restrictions continue to be lifted.

“Whether it was their work, all of the lifestyle amenities in the neighborhoods, the bars, the restaurants, kind of all were shut down,” Saito said. “There was no reason for people to stay in the cities.”

Massachusetts Gov. Charlie Baker last month loosened restrictions allowing larger gatherings and some entertainment venues to reopen, and business confidence has reached pre-pandemic levels as the Covid-19 vaccination rollout, economic stimulus effort and return-to-work plans have all picked up speed. Local universities are also mulling vaccination requirements to allow Boston’s big student population to return to campus this fall.

Offering up to two-and-a-half months free rent, Lendlease's Clippership Apartments on the Wharf has seen strong leasing activity of late, Iselin said, providing a light at the end of the tunnel.  

“I think it’s going to take a while for rents to recover to pre-pandemic levels,” Iselin added. “All the developers are playing the same deck of cards."

CORRECTION, APRIL 9, 11 A.M. ET: A previous version of this story incorrectly identified the lead image of the Bower residential complex. The story has been updated.