Boston 2023 apartment market outlook

Boston’s apartment rents are expected to grow by more than 11% in 2022 when final numbers are in, and vacancies have been trending down. But economic headwinds could slow that rise in 2023. Victor Calanog, Head of Commercial Real Estate Economics at Moody’s Analytics, shares his analysis.

Boston’s robust rent growth expected to slow

The Boston apartment market posted impressive rent growth in the second and third quarters of 2022, with effective rents rising by 4.7% and 4.5%, respectively. Vacancies continued to crest downward, hitting 6% in the third quarter, according to Moody’s Analytics CRE. 

That’s still elevated relative to the city’s 5.1% pre-pandemic vacancy rate, but it is in part because Boston construction deliveries did not really slow down during the pandemic. Close to 5,400 units were delivered in 2021, and 2022 deliveries could be above 6,500. Those are pretty respectable construction figures even compared with 2018 and 2019.

Still, we are expecting economic headwinds to slow the apartment market’s performance over the next 12 months. Effective rents grew by over 10% in 2022, but it will likely slow to below 5% in 2023. That may be revised if a recession hits.

Top submarket: North Shore/Merrimack River Valley

Some submarkets may enter a downturn in a stronger relative position. The North Shore/Merrimack River Valley submarket posted the strongest year-over-year effective rent growth, at 21.5%. The year-over-year effective rent growth in this submarket actually accelerated from 14.8% in the second quarter. That ranks it sixth among the 846 multifamily submarkets tracked by Moody’s Analytics.   

Multifamily in better position than other sectors

Moody’s also expects the multifamily sector (along with the warehouse/distribution sector in industrial) to weather near-term economic storms better than property types like office and retail, which are both wrestling with long-term structural challenges.

By the editorial team at Story by J.P. Morgan