BOSTON (Feb. 5, 2010)—Although Greater Boston multifamily rental market hit the 10-year high vacancy mark in 2009, multifamily investment activity picked up steam late last year, indicating that the market will gain its momentum in 2010 as savvy investors continue to hunt for value-added properties across the state, NAI Hunneman reported today in its annual multifamily investment report.

NAI Hunneman, a leading provider of commercial real estate services to corporations, institutions and the private market, is a leader in the sale of multifamily property in metro Boston. The firm’s investment sales team, since 2003, has completed over 300 transactions and more than $1.2 billion in sales volume.

“Unlike the first half, the last six months of 2009 saw an increase in sales activity, mostly from private equity investors purchasing smaller assets,” said Carl Christie, Executive Vice President/Principal at NAI Hunneman. “Out of all the transactions surveyed, only eight sales were recorded over $10 million, and all of those sales happened in the second half of 2009. We expect that momentum to continue in 2010.”

The report said that multifamily properties, like all other investment property types in Massachusetts, saw a decrease in the number of sales in 2009. The decrease in activity was due in large part to the market paralysis experienced in the first half of the year. The financial crises in the fourth quarter of 2008 caused a freeze-up in the credit markets and many investors, voluntarily or otherwise, sat on the sidelines. Investor sentiment was down and so were prices in 2009. The year saw a decrease in the sales price per unit and capitalization rates increased over 120 basis points from their average in 2007 – another obvious sign of a market correction.

“Well-located urban assets and attractive garden-style suburban properties remain in demand. Capitalization rates have increased across all property types, but are still very low in historical context,” added NAI Hunneman’s Dan McGee, Investment Sales/Financial Analyst. “Residential and commercial properties have experienced dramatic decreases in value, but multifamily continues to be viewed as a less-risky avenue for investment. The relative stability in rents and vacancies has helped apartment buyers get favorable financing and close sales.”

The NAI Hunneman report quoted research firm REIS saying the vacancy rate in metro Boston rose to 6.4 percent in the third quarter of 2009. This was a high-water mark for vacancy over the last 10 years that saw vacancy rates of 1.3 percent in 1999 and 4.7 percent in 2005.



Still, metro Boston remains one of the most expensive rental markets in the country. The Greater Boston Housing Report Card 2009 reported that renters in Greater Boston paid an effective rent of $1,629 a month in the Q2 2009. This rent has softened, due to the economy, from a high of $1,658 in Q3 2008. However, the effective rent was reported to be $1,444 in the 1st Quarter of 2004, so we have seen rents increase over the last four years even while housing prices have decreased. The multifamily sector also saw a complete drop-off of new construction in 2009. This gap in the supply pipeline is likely to lead to increased rents in the future when demand picks up again.



“The increase in sales activity in the second half of 2009 might be a signal of what is to come this year. Values have come down, but prices are not expected to slide dramatically, as long as market fundamentals remain stable,” said Mr. Christie. “There are many active investors in the market and prospective buyers are no longer in limbo as long as lending remains attractive and available. We expect the number of arms-length transactions to increase in 2010. As always, the velocity of sales will depend on the spread between the bid and ask. If sellers adjust to the market, we will see many more transactions than last year.”

< Back to News List