Unfortunately for building owners, the number of new market-rate units that got completed in the last few years is the largest number of deliveries since the mid-1980s, and more are supposed to get completed this year.
The steepest rent declines have been in the luxury product sector, as existing Class-A properties are having to reduce pricing to hold onto the renters who or seeking. Tenants are shopping for more affordable housing options. Some tenants have been shopping around for the best move-in specials, to get a couple of months of free rent.
Retention rates were extremely high during the summer, but have moderated substantially since then. This is especially true for downtown Boston. We’ve lost households to more affordable Boston suburbs and some of the renters that remain are bouncing around from one property to another in order to take advantage of discounted prices for new-resident move-in specials.
Boston Real Estate and the Bottom Line
What is the outlook for Boston luxury apartments in the intermediate term? I think the “concession-shopping” behavior will continue and that the Boston suburb apartment buildings, will continue to see a significant improvement for the upcoming months. There will be a continued weakness this year in Boston downtown apartment rentals because of the large chunk of new supply that will reach completion, but looking farther ahead, into 2022 and 2023, I expect the apartment market to tighten up again.