News: Spotlights

Marcus & Millichap Apartment Research Market Outlook: Low interest rates lure institutions back to the market

Limited construction activity and a surge in payrolls this year will propel improvements in Boston apartment operations ahead of most of the nation. Deliveries will drop to the lowest level in more than a decade during 2011, boosting the performance of existing complexes, particularly as job growth accelerates. Employers will elevate head counts to near pre-recession levels. Large job gains in the professional and business services and financial activities sectors, especially, will ignite renter demand for Class A units. Core submarkets like Central City/Back Bay/Beacon Hill will receive the most leasing activity as residents move closer to major employers in the Financial District. As a result, the submarket's vacancy rate will plunge 110 basis points this year, surpassing the metrowide decrease. Apartment properties in the suburbs will also demonstrate improvements through 2011, though, with employment gains in the goods and services industry fueling strong absorption of lower-tier units in areas such as the North Shore/Merrimack River Valley, where blue-collar jobs comprise a significant portion of the work force. Investment activity will increase this year as institutional investors move off the sidelines to take advantage of the low cost of capital and properties trading below replacement cost. The growing presence of these buyers in the market should entice owners to unload assets at attractive yields, particularly in Suffolk County, where cap rates among Class A properties containing 200-plus units dipped into the low-6% range last year. Private, in-state buyers will also step up their activity, focusing on outlying areas such as the Mystic River North/Rte. 128 submarket for properties listed below $5 million, especially those along major transportation routes like state Rte. 99 and U.S. 1. These experienced local investors will seek to purchase low to mid-tier assets with deferred maintenance; these properties currently trade with first-year yields 110 basis points above the market average. Additional investment opportunities will emerge east of I-93 in the South Shore/Rte. 128 submarket, where operations continue to stabilize and the median price in apartment deals has dropped nearly 20% since 2006. 2011 ANNUAL APARTMENT FORECAST Employment: Boston employers will expand payrolls by 2% this year by adding 49,000 jobs, the largest annual increase in more than a decade. During 2010, metro head counts expanded by 37,000 positions. Construction: Apartment construction output will slow to 285 units in 2011, expanding inventory by just 0.1%, well below the 10-year average of 2,800 units annually. In 2010, builders completed more than 1,040 apartment units. Vacancy: Supported by decreased building activity and positive net absorption of 2,050 units this year, the metrowide vacancy rate will drop 90 basis points to 4.2%, well below pre-recession levels. In 2010, vacancy plummeted 130 basis points. Rents: Asking rents will reach a historical high in 2011, advancing 3.5% to $1,772 per month. Effective rents will increase 4.5% to $1,694 per month as leasing incentives dip to an eight-year low of 16 days of free rent.
READ ON THE GO
DIGITAL EDITIONS
Subscribe
READ ON THE GO
DIGITAL EDITIONS
Subscribe
Quick Hits
STAY INFORMED FOR $9.99/Mo.
NEREJ PRINT EDITION
Stay Informed
STAY CONNECTED
SIGN-UP FOR NEREJ EMAILS
Newsletter
Columns and Thought Leadership
Ask the Electrician:  How do I prepare my commercial building for a disaster?

Ask the Electrician: How do I prepare my commercial building for a disaster?

New England’s notorious weather – from fierce winter storms to summer squalls and fall hurricanes – can leave businesses in the dark. While power outages are often blamed on storms, they can also be caused by unforeseen events like accidents or construction mishaps. While it’s impossible to prevent disasters and power outages entirely, proactive preparation can significantly minimize their impact on your commercial building.
The New England Real Estate Journal presents<br> the First Annual Project of the Year Award! Vote today!

The New England Real Estate Journal presents
the First Annual Project of the Year Award! Vote today!

The New England Real Estate proud to showcase the remarkable projects that have graced the cover and center spread of NEREJ this year, all made possible by the collaboration of outstanding project teams. Now, it's time to recognize the top project of 2024, and we need your vote!
Investing in a falling rate environment - by Harrison Klein

Investing in a falling rate environment - by Harrison Klein

Long-term interest rates have fallen by 100 basis points, and the market is normalizing. In December of 2022 I wrote an article about investing in a high interest rate, high inflation market. Since then, inflation has cooled off, and the Fed has begun lowering their funds rate.
The 2024 CRE markets: “The Ups” (industrial) and “The Downs” (Boston class B/C office) - by Webster Collins

The 2024 CRE markets: “The Ups” (industrial) and “The Downs” (Boston class B/C office) - by Webster Collins

The industrial markets have never been stronger. What has happened is that the build out of Devens with new high-tech biotech manufacturing with housing to service these buildings serves as the connector required to really make the I-495 West market sizzle. Worcester has been the beneficiary