Downtown Boston Apartment Supply Carnival Ride
The vacancy rate for apartments in downtown Boston has been on a roller coaster ride since the pandemic began. No other neighborhood in Boston endured more supply troubles than downtown. When Boston’s vacancy rate swelled above 7% in September of 2020, it skyrocketed to 25% downtown, leaving landlords scrambling to fill units that were once the most sought after in Boston.
The wild ride didn’t end there. While Boston’s vacancy rate was starting its long road to recovery last fall, the vacancy rate downtown rapidly contracted back down to below 6% by the end of October, only to surge back up to 20% by the first week of January. It left landlords and industry professionals astonished with more questions than answers. Was this the new normal? Has remote work depleted the young professional population so much that we have a permanent supply crisis on our hands?
We had 4 long months to ponder these questions while downtown’s vacancy rate hovered between 20% and 25%. Landlords slashed prices and offered incentives to try and spur demand for their downtown apartment units, but the market wasn’t reacting. Then in April, apartment vacancies in downtown Boston began a rapid decline. By June it had dropped to below 6% and by September it was below 1%. It has since creeped up to 1.33%, 18% higher than its pre-COVID mark in November 2019.
Most of Metro Boston’s apartment supply issues can easily be explained by remote learning and its impact on the local off campus housing demand. Downtown is a different animal. It’s not known to be a student enclave, and the long term affects of the remote work revolution are still uncertain. It is possible that lower rent prices downtown may have attracted some students this year that wouldn’t normally consider downtown. It would certainly explain why the vacancy rate declined so quickly starting in April (schools announced in-class learning in March of this year).
The jury is still out on this. Until we start to see the same cyclical trends in downtown Boston apartment data that we’re used to seeing in Boston’s student markets, it will be hard to say for sure. In the meantime, it’s nice to ponder these questions without a quarter of the apartment inventory empty.