Many of us from Charlesgate Realty and our Mutlifamily Division were able to attend yesterday’s BISNOW 4th Annual Multifamily Summit. There were two panels of speakers that represented property owners, developers, and financiers from around Boston and New England. Some of the panel speakers included Harold Brown, CEO of Hamilton Company which owns over 5,000 units in the Boston area, Arthur Klipfel, Founding Partner of Oaktree Development, Michael Roberts, VP of Development for AvalonBay, and Travis D’Amato, SVP of Multifamily Investment Sales at Jones Lang LaSalle.
Collectively, their prediction for the 2014 market is that it will closely mirror the 2013 market when about 4,000 units of housing came onto the market. For perspective, Washington DC saw about 10,000 units, Portland @ 4,200, and Seattle was about double at 8,000 units.
In considering the drivers for the market, 3 items were discussed at length:
- Predictable Economy (Comfort)
- New Development
- The amount of capital that wants to be in Boston
One concern in the market is the amount of people that are willing and able to pay market rate of $4.50 per square feet to rent in the urban core. This means for a 1,000 sq ft space, you are looking at rent of $4,500 – while smaller “micro units” can actually rent closer to $6.00 per sq ft. (a 300 sq ft studio for say $1,800 a month.)
(BTW, want to see what you can get in the Boston urban core for $4,500 a month? Click here.)
One way that developers are making these smaller spaces more appealing is the offering of increased amenities in the building – giving renters more value for their money. One such amenity is the offering of hotel room spaces so that you can have a smaller unit but also spaces for visitors and guests.
The key question to developers is finding where the intersection of “how small will people go” with “what they will pay.”
Interesting to note is how small this market really is. The lux rental market that this question is focused towards is only 1-2% (or about 9,000 units in Boston). Of these, only 6-7% are studios. So not a huge market specifically but it highlights aspects of the market as a whole.
Two projects that were of special interest were Ink Block’s SEPIA and The Kensington. These highlight many of the changes in the marketplace with their pricing and unit mix.
Greg Bialecki, Massachusetts Secretary – Housing & Economic Development, was the guest speaker to discuss the state of the market in MA as a whole. He talked about planning ahead for growth in MA and highlighted that job growth is near 1% and that all factors were strong in a market that does not have as much room for growth as a state such as North Dakota does.
What does he say to watch for in 2014?
- Local companies getting larger. 2,000 more jobs are being added at Athena Health, a new TripAdvisor headquarters, and developments such as these will all make a big impact in the market.
- New geographic centers of economic activity
- Workers want multifamily homes and they want them near transit and employment.
