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303 Congress Street Boston, MA 617.457.3400 www.naihunneman.com 1

CONSTRUCTION WAVE CONTINUES IN BOSTON

303 Congress Street | Boston, MA 02210 | 617.457.3400

www.NAIHunneman.com

MARKET RATE

AFFORDABLE RATE

CAPITAL MARKETS

Q4 2017 MULTIFAMILY

M E T R O B O S T O N

INSIDE STATISTICS...

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Boston’s Construction Wave is ComingIn 2017, demand drivers impressed as both population and employment trends remained positive throughout New England’s largest metro areas. Greater Boston outperformed with the metro’s population base surpassing 4.8 million. The unemployment rate steadily declined during the second half of the year; falling below 3% in December, and expansions in the education, tech and life science industries continue to drive the Boston metro area’s economy. Steady job growth and continued migration toward urban and infill locations bode well for household formation in this market. Vacancies in the Boston metro’s Class A+/A asset class increased to 4.7% in the fourth quarter while the Class A-/B+ and Class B/B- asset classes posted vacancy rates of 4.1% and 3.6%, respectively.

Nationwide, developers remain active in urban core locations; particularly in gateway cities like Boston. From 2015-2017, almost 20,000 market rate units have delivered in Greater Boston, which represents 13% of the metro area’s total apartment inventory. With another 11,500 units slated to complete in 2018, the inventory will expand by another 7.6%. Construction has been focused on East Boston, the Seaport and core

suburban towns surrounding the city. However, construction outside of the Route 128 loop has been more subdued this cycle. The market may see an increase in concessions as new units deliver in the coming quarters. With that said, construction starts dropped across many of the top markets in the U.S.; including Boston.

While this wave of new construction is beginning to weigh on effective rents, the area maintains some of the most expensive rental markets in the country. According to Zumper, the median rent for a one-bedroom unit was $2,400 per month and nearly $2,300 per month in Cambridge and Boston, respectively. Another data source, ABODO Apartments, ranks Cambridge the third-most expensive city to rent a one-bedroom apartment in the U.S. — behind only San Francisco and New York. While trends in the Providence and Springfield/Worcester metros tend to be more pedestrian than in Boston, multifamily fundamentals are just as positive. Vacancies remain well below 4% in both markets, demand drivers are solid and market rate asking rents continue to increase. Vacancies in Providence’s Class A+/A asset class inched up to 3.7% in the fourth quarter, and the Class A-/B+ market

saw vacancies climb to 4%. In the Springfield/Worcester metro vacancies in Class A-/B+ assets ended the year at 2.8%. The construction pipeline in these markets is a drop in the bucket compared to Greater Boston. However, deliveries ticked up in 2017, with several hundred units coming on line in both Providence and Springfield/Worcester.

Affordability, particularly in Boston, remains a key topic of debate. While the state has committed funds for affordable housing developments in Massachusetts, the recent H.R. 1 tax cuts and jobs act will certainly have an impact on the larger multifamily market. First, the impending decrease in corporate tax rates will likely drive down the value of Low-Income Housing Tax Credits, which will ultimately affect affordable housing construction. As a result, the demand for acquisition and rehab opportunities in the affordable housing space will likely grow and we can expect a consolidation of ownership in this market. Other potential impacts of this recent tax legislation include a decline in home prices, which could weigh on rental demand as renters opt for homeownership, and a temporary bump in value for owners of suburban, market-rate multifamily properties as these renters await a pricing correction in the single-family home market.

Population Growth:

0.3% Year-Over-Year as of 2017

Population Age 20-34:

21.5% As of 2017

Household Growth:

-1.6% Year-Over-Year as of 2016

Multifamily Permits:

8,940 30.2% Increase YTD as of December

Median Household Income:

$71,336 Massachusetts as of 2017

2017

MULTIFAMILY OVERVIEW

CONCESSION (AVERAGE $)

UNITS DELIVERED

12-MONTH ABSORPTION

ASKING RENT $/SF

TOTAL VACANCY RATE

TOTAL VACANCY RATE

ASKING RENT $/SF

YTD ABSORPTION UNITS

UNITS DELIVERED(YTD)

ANNUAL CONCESSION (AVERAGE $)

3.40% $2.17 2,881 7,473 1.5%

Q4


Units Completed20132014201520162017

Boston Providence Springfield/Worcester

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2012 2013 2014 2015 2016 2017


Rents

$0

$500

$1,000

$1,500

$2,000

$2,500

Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017


2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

Q12012

Q32012

Q12013

Q32013

Q12014

Q32014

Q12015

Q32015

Q12016

Q32016

Q12017

Q32017


Rents

$0

$500

$1,000

$1,500

$2,000

$2,500

Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017


2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

Q12012

Q32012

Q12013

Q32013

Q12014

Q32014

Q12015

Q32015

Q12016

Q32016

Q12017

Q32017


RENTS

VACANCY

UNITS COMPLETED

TOTAL INVENTORY

(UNITS)

TOTAL VACANT (UNITS)

TOTAL VACANCY

RATE

Q4 NET ABSORPTION

YTD NET ABSORPTION

ASKING RENT ($/SF)

Boston Metro 149,991 5,250 3.5% 282 3,144 $2.39

Providence Metro 26,302 868 3.3% 44 52 $1.53

Springfield/Worcester Metro 25,391 711 2.8% 74 (458) $1.50

TOTAL 201,684 6,829 3.4% 400 2,738 $2.17

TRENDS

• Due to the progressive uptick in new construction, vacancy rates saw a slight increase in the fourth quarter of 2017. On the whole, rates ended 2017 at 3.4%, with Springfield/Worcester boasting the lowest vacancies at 2.8%.

• Boston’s high apartment rents are continuing to push renters to relocate to more affordable locales. According to Apartment List, a large percentage of renters surveyed in Boston plan to move to another city due to affordability. The survey revealed Providence as the top spot for relocating Bostonians.

• The Boston Planning & Development Agency (BPDA) recently approved a series of residential, commercial and hospitality projects across the city, which are expected to generate a total of 541 units and more than 1.4 million square feet of new space. Aside from two large projects, the Omni Boston Seaport Hotel and the 426-unit community development at 264 Huntington Ave., three smaller residential projects recently received approval. This includes a 22-unit project at 75-85 Liverpool Street in East Boston and a 46-unit project at 46 Hichborn Street in Brighton.

• Brighton may also see a wave of new supply. The BPDA recently approved the construction and restoration of nearly 660 residential units at 159-201 Washington Street. The project will feature 98 affordable units, a 1,000-square-foot, publicly-accessible art gallery as well as a 1,200-square-foot multipurpose function room.

• A joint venture of Twining Properties and Mass PRIM has been established on Mass+Main, a 308,000-square-foot, $190 million development in Cambridge. The project will include 308 mixed-income apartments and 17,000 square feet of retail space. Construction of the development will commence in the fall of 2018.

MARKET RATE MULTIFAMILY

*Expected


4

AMI Income Limits - MA1-person2-person3-person4-person5-person6-person7-person8-person

Fair Market Rents

Units Completed

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

$90,000

$100,000

1-person 2-person 3-person 4-person 5-person 6-person 7-person 8-person

Extremely Low Very Low Low

$0

$500

$1,000

$1,500

$2,000

$2,500

Effeciency 1-Bed 2-Bed 3-Bed 4-Bed

Boston Providence Springfield Worcester

AMI INCOME LIMITS - MA

FAIR MARKET RENTS

2014201520162017

0

200

400

600

800

1,000

1,200

2012 2013 2014 2015 2016 2017


AMI Income Limits - MA1-person2-person3-person4-person5-person6-person7-person8-person

Fair Market Rents

Units Completed

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

$90,000

$100,000

1-person 2-person 3-person 4-person 5-person 6-person 7-person 8-person

Extremely Low Very Low Low

$0

$500

$1,000

$1,500

$2,000

$2,500

Effeciency 1-Bed 2-Bed 3-Bed 4-Bed

Boston Providence Springfield Worcester

UNITS COMPLETED

2017

AFFORDABLE RATE MULTIFAMILY

TOTAL INVENTORY

(UNITS)

UNITS COMPLETED

(2012-16)

EXPECTED COMPLETIONS

(2017)

Boston Metro 63,594 2,195 515

Providence Metro 24,464 198 205

Springfield/Worcester Metro 20,895 496 -

TOTAL 108,953 2,889 720

*Expected

Q4

TRENDS

• Annually, The Boston Foundation’s Greater Boston Housing Report Card judges both the affordability and availability of housing in the Greater Boston area. In 2017, the report estimates that housing in Greater Boston will increase by nearly 12% from 2016.

• The same report also highlights the need for more multi-unit housing in the Boston metro, which should target two growing demographic cohorts: millennials and seniors. According to data from the Metropolitan Area Planning Council, these two demographics are the only groups expected to grow through 2030.

• To date, 22,000 new residential units have come on line in Boston, which represents over 40% of the 53,000 Mayor Marty Walsh’s administration promised by 2030. Of the 22,000 completed units, 4,062 are restricted to middle-income households, or families of four that make a combined $125,000. Another 1,682 units are restricted to low-income households, or families of four that make between $21,000 to $62,050. In total, 6,500 of the proposed 53,000 units will be reserved for low-income households.

• The Beverly, a long-awaited low and middle-income apartment building offering 239 subsidized units, was completed in the fourth quarter of 2017. Of the 6,000 people that applied for the 239 apartments, only 48 will be awarded to low-income renters (those earning up to $41,400 a year).

• In the Providence metro, the rise of the housing market in 2016 lead to rising prices, and in turn meant fewer homes and apartments available for families with household incomes below $50,000. Due to this increasing “affordability gap,” there were 1,561 foreclosure deeds issued, an increase of 32% from the previous year.

• The Sisters of Providence, a Catholic religious community, was awarded $750,000 in Community Preservation Act funding from West Springfield to aid construction of 36 affordable housing units on Riverdale Street in Springfield.


Boston Metro - Sales

Providence - Sales

Q3 2014Q4 2014Q1 2015Q2 2015Q3 2015Q4 2015Q1 2016Q2 2016Q3 2016Q4 2016Q1 2017

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5

$4.0

2012 2013 2014 2015 2016 2017

In B

illio

ns

Total Volume ($) Median $/Unit

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$0.0

$20.0

$40.0

$60.0

$80.0

$100.0

$120.0

2012 2013 2014 2015 2016 2017

In M

illio

ns


BOSTON METRO SALES

PROVIDENCE SALES

Springfield/Worcester - Sales

Q2 2015Q3 2015Q4 2015Q1 2016Q2 2016Q3 2016Q4 2016Q1 2017

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

$0.0

$20.0

$40.0

$60.0

$80.0

$100.0

$120.0

2012 2013 2014 2015 2016 2017

In M

illio

ns



Providence - Sales

Q3 2014Q4 2014Q1 2015Q2 2015Q3 2015Q4 2015Q1 2016Q2 2016Q3 2016Q4 2016Q1 2017

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5

$4.0

2012 2013 2014 2015 2016 2017

In B

illio

ns


$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$0.0

$20.0

$40.0

$60.0

$80.0

$100.0

$120.0

2012 2013 2014 2015 2016 2017

In M

illio

ns


NOTABLE TRANSACTIONS

SPRINGFIELD / WORCESTER SALES

CAPITAL MARKETS

BUYER PGIM REAL ESTATEJEFFERSON APARTMENT

GROUPTAURUS INVESTMENT

HOLDINGS, LLCWESTBROOK PARTNERS CHARTWELL HOLDINGS

ADDRESS 99 Kneeland Street 1 Upland Woods Circle 500 Broadway 660 Ocean Avenue 1220 Adams Street

TOWN Boston Norwood Malden Revere Dorchester

# OF UNITS 217 262 295 194 133

SALE PRICE $144,500,000 $93,000,000 $71,000,000 $59,850,000 $35,200,000

TOTAL SALES VOLUME ($)

SPRINGFIELD / WORCESTER SALES VOLUME ($)

PROVIDENCE SALES VOLUME ($)

BOSTON SALES VOLUME ($)

TRENDS

• Both locally and nationally, multifamily assets remain a favorite among investors. In 2017, more than $3.4 billion in assets changed hand in the Boston metro. This volume level represents a 4.3% increase from the previous year and a slight decrease from the 2015 peak. The median price-per-unit also continues to rise; reaching $207,206/unit in the fourth quarter of 2017.

• In November, Lone Star Funds sold a portfolio of 25 multifamily properties to Harbor Group International for $1.8 billion. The sale included the Gardencrest Apartments in Waltham, which garnered an allocated price per unit of $298,000.

• Cap rates for Class A product in the Boston metro remain low; ranging from high-3% to low-5% during the fourth quarter of 2017.

• The Providence metro clocked in more than $109 million in multifamily investment sales in 2017. Pricing has also climbed since 2012, with the median price per unit ending the year at $64,500. Affordable Housing and Services Collaborative’s acquisition of a 64 unit low-income apartment building in Taunton for $2.7MM marks the largest transaction of the quarter.

• In the Springfield/Worcester metro, more than $113 million in multifamily assets changed hands in 2017, and the median price per unit increased to $68,750. The largest transaction of the fourth quarter 2017 here was a 36 unit apartment complex that sold for roughly $3.5MM or $96,000 per unit.


Providence - Sales

Q3 2014Q4 2014Q1 2015Q2 2015Q3 2015Q4 2015Q1 2016Q2 2016Q3 2016Q4 2016Q1 2017

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5

$4.0

2012 2013 2014 2015 2016 2017

In B

illio

ns


$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$0.0

$20.0

$40.0

$60.0

$80.0

$100.0

$120.0

2012 2013 2014 2015 2016 2017

In M

illio

ns



Committed to Boston, Connected to the World.6

90 90

91

91

495

195

495

190

495

95

93

9595

95

395

395

84

8495

295295

89

89

95

95

91

91

91

95

195

90

90

90

495

495495

495495

RENT MAPM E T R O B O S T O N

2017

AVERAGE BY CITYQ4 2017Source: Yardi Matrix

$2,280 or more

$1,620 - $2,280

$1,190 - $1,620

$640 - $1,190

$640 or less

Q4


MULT IFAMILY INVESTMENT TEAM

M E T R O B O S T O N M E T R O B O S T O N

MARKET RECAP

MARKET RATETOTAL INVENTORY

(UNITS)

UNDER CONSTRUCTION

(UNITS)

TOTAL VACANT (UNITS)

TOTAL VACANCY RATE

Q4 NET ABSORPTION

(UNITS)

YTD NET ABSORPTION

(UNITS)

ASKING RENT ($/SF)

Boston Metro 149,991 13,546 5,250 3.5% 282 3,144 $2.39

Providence Metro 26,302 1,298 868 3.3% 44 52 $1.53

Springfield / Worcester Metro 25,391 694 711 2.8% 74 (458) $1.50

MARKET RATE TOTAL 201,684 15,538 6,829 3.4% 400 2,738 $2.17

ELLIOTT WHITEAssistant Vice President

[email protected]

GINA BARROSOAssistant Vice President

[email protected]

IAN MCKINLEYSenior Associate

[email protected]

CARL CHRISTIEExecutive Vice President

[email protected]

DAVID N. ROSS Executive Vice President

[email protected]

ROBERT TITO Executive Vice President

[email protected]

DAN MCGEEAssistant Vice President

[email protected]

HENRY D. LIEBERAssistant Vice President

[email protected]

AFFORDABLE RATETOTAL INVENTORY

(UNITS)

Boston Metro 63,594

Providence Metro 24,464

Springfield/Worcester Metro 20,895

AFFORDABLE RATE TOTAL 108,953


mailto:[email protected]








303 Congress Street | Boston, MA 02210 | 617.457.3400

www.NAIHunneman.com

MULTIFAMILYM E T R O B O S T O N

2017

METHODOLOGY

SOURCE: Co-Star, Yardi Matrix, NAI Hunneman Commercial Company. PREPARED: January, 2018. DISCLAIMER: The above data is from sources deemed to be generally reliable, but no warranty is made as to the accuracy of the data nor its usefulness for any particular purpose. Average Rental Rates are asking rents on direct space.

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AFFORDABLE RATE

CAPITAL MARKETS


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