REGIONAL MARKETS: NORTHEAST & MID-ATLANTIC
APARTMENT FINANCE TODAY • MARCH 2008
Northeast and Mid-Atlantic At-A-Glance
BOSTON
What ever happened to Boston’s
high barriers to development?
Builders finished 5,100 new apartments
here in 2007, according to
the research arm of Marcus &
Millichap. That’s a 3 percent
increase to the local inventory. It still
can take up to seven years to get a
project approved and construction
started in this contentious city, but
developers have stretched their
patience and their budgets to overcome
development hurdles. So
many made the leap that in 2007
their completed apartments pushed
the vacancy rate up 90 basis points
to reach 5.9 percent
at year’s end. However, there is
hope for the future: Completions
are expected to fall to about 3,000
in 2008. With the help of strong job
growth, that should drop the vacancy
rate to the mid-5 percent range,
according to Marcus & Millichap.
PROVIDENCE, R.I.
One of the slender towers rising over
Waterplace Park downtown may soon turn
into a rental apartment building, at least for
a year or two. This spring, Boston developer
Intercontinental Real Estate Corp. will
finish 193 luxury condominiums in two
high-rise buildings at its Waterplace Park
development, but by January only a handful
had sold. Intercontinental is considering
renting the units in one of the towers until
the condominium market firms up.
There’s one problem: Providence has the
highest vacancy rate of any major
Northeast rental market. Effective rents
grew just 1.4 percent here in 2007, according
to Reis, Inc. At least rents grew instead
of shrinking, and the percentage of vacant
apartments dropped from a whopping 9.2
percent in the first quarter to a more manageable
6.9 percent at the end of the year.
That new-found stability could vanish if
enough of the more than 1,000 condos
now under construction downtown enter
Providence’s 15,000-unit rental market.
NEW YORK CITY
If you can find an apartment here, you
can find one anywhere. New York City’s
percentage of vacant apartments
dropped to 2.1 percent at the end of
2007 from 2.3 percent the year before,
making it the Northeast region’s tightest
apartment market, according to
research firm Reis, Inc. The vacancy rate
is now at its lowest point since the Sept.
11 terrorist attacks. Experts thought
vacancies would rise last year, even
before the economy began to falter. But
developers finished fewer apartments
than expected, adding just 1.7 percent
to the inventory. These 2,400 new
apartments weren’t enough to fill the
demand of new tenants drawn here by
stronger-than-expected job growth. In
addition, developers took more than
400 apartments off the market in 2007
to convert to condominiums. Yes, that’s
right, even in a nationwide for-sale
housing crash, a few New York City
neighborhoods still have booming
condo markets. Citywide, condo prices
rose 17 percent in 2007, according to
the Real Estate Board of New York. New
York’s shrinking number of vacant
apartments helped push effective rents
up 9 percent in 2007, according to Reis.
That’s the strongest rent growth of any
major Northeastern market.
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