Boston mid-2023 apartment market outlook

Boston mid-2023 apartment market outlook

Two years of stellar rent growth came to a halt in Q1 2023. Is it a seasonal slump or a sign of rocky times ahead? Victor Calanog, Ph.D., Commercial Real Estate Economist, shares his take, leveraging data from Moody's Analytics CRE.

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Boston multifamily struggles to match record rent growth 

After two straight years of phenomenal asking and effective rent growth, Boston apartment performance metrics might have hit an iceberg in Q1 2023. The question is whether it’s a little bump in the trip, or whether it’s a Titanic-level of hurt, Calanog says.

Boston’s asking and effective rent growth figures were both at record highs in 2021 and 2022, with rents rising over 12% annually for both years. Think about it: Over just two years, landlords were able to raise rents over 25%. 

Economic, geopolitical uncertainties lie ahead

However, asking and effective rent growth fell in Q1 2023, with levels dropping around 0.2%. Optimists might say that’s typical seasonal weakness, and spring and summer leasing will make up for it.

The issue is whether demand will wane. Recession probabilities remain uncomfortably high, driven by ongoing geopolitical uncertainties and the recent turmoil in liquidity that might result in a significant pullback in credit. 

Mystic River North area struggles

And it’s important to monitor local conditions: The Mystic River North, or Route 128, submarket dragged Boston’s metro rent growth figures down, as the submarket’s asking and effective rents fell 1.8% and 2%, respectively, in Q1.

The next 12 to 18 months will be critical. Apartment landlords will want to prepare for a volatile near term, even if the sector’s prospects remain healthy in the medium-to-long run. 

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

What’s the multifamily outlook in other U.S. metro markets? Watch our midyear mid-2023 analyses for more cities across the country.

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