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Aug 27
2009
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It's nice when every piece of the puzzle fits into place. But it's not particularly unusual for a metro's apartment sector performance stats to appear a little surprising for a short period of time. Once you're looking backwards, you may realize that early estimates of employment change were stunningly inaccurate. Or that the general appeal of shadow market rental alternatives for some reason shifted suddenly. Or that numerous apartment operators made odd rent positioning choices which impacted demand and occupancy patterns. Right now, Boston is the U.S. apartment market with perhaps the hardest-to-explain results posted during recent months.
Boston is putting up the same sort of ugly employment figures seen almost everywhere else across the country. Annual cuts are running at roughly 100,000 positions, translating to downsizing in the job base of just over 3 percent. (These stats reflect MPF Research's definition of Boston, which includes metro Providence, Rhode Island, as well as the southern portion of the state of New Hampshire ... we obviously took that New England concept to heart in drawing those boundaries.)
Despite the big job losses, about 2,400 apartments were absorbed in Boston during the first half of 2009. That demand number very slightly surpasses the metro's completion tally during the initial six months of the year, so June occupancy of 93.5 percent was right in line with the late 2008 result of 93.4 percent. (Like almost every other metro across the country, Boston did suffer a notable occupancy slide as 2008 came to an end, but there hasn't been any further deterioration.)
While some other markets throughout the U.S. managed to sustain stable occupancy during recent months, those areas tended to buy demand with drastic rent cuts. That hasn't been the case in Boston, however, where effective rents in MPF Research's same-store sample set actually have inched up by a few dollars so far during 2009.
Whatever is propping up Boston's overall apartment sector stats beyond the levels that the struggling economy would suggest is possible seems to be influencing every neighborhood about equally. Indeed, the Interstate 93 Corridor submarket is the only locale where the apartment performance has stumbled notably so far during 2009, and that difference is readily explained by the submarket's oversized 25 percent share of metro Boston's recent completions.
Given the hoops that property owners in parts of the Northeast have to jump through in order to evict residents who aren't paying rent, the impact of Boston's sizable job cuts perhaps just haven't shown up yet in the metro's apartment market stats. Even if that's the situation, however, prospects moving forward perhaps aren't all that bad because ongoing construction of about 4,100 units is off so notably from the volumes recorded during the past few years.
Stay tuned. Boston is a metro that still could have significant further surprises - good or bad - up its sleeve.
Market Dynamics is an examination of key influences on the apartment industry by MPF Research, the industry's most trusted source of apartment market intelligence. To receive the latest Market Dynamics newsletter in your e-mail inbox, please click here to subscribe.
