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How is COVID-19 Impacting Boston's Multifamily Market?

There are articles out there on opposite ends of the spectrum opining on how the multifamily market will fare during and after this COVID-19 pandemic.  Some say that the multifamily market will be among the hardest hit; others believe it will be one of the best performers.  Things are changing every day, as we progress through the re-opening stages.  Here is a look at a few metrics we have been tracking.


 

The number of multifamily properties that have come on the market in recent months is well below last year's levels.  This is likely due to a number of factors - for instance, owners and tenants have been cautious of having people into their properties, and many sellers have taken a wait-and-see approach in terms of timing for putting a property on the market (trying to wait for the most opportune time).


 

The beginning of this year saw more closings than last year - which is similar to what we have seen in Boston's condo market.  These were mainly deals that had been struck prior to the COVID-19 outbreak.  Since sales typically take 30-60 days to close, it is likely that we will continue to see the dip in closed transactions in April and May continue, since the number of properties that came on the market was low. 

Interestingly, sale prices do not yet seem to have been impacted.  The chart above captures Boston as a whole and depicts an average price per square foot.  We are closely monitoring pricing.  On the one hand, the Fed's insistence that they will keep interest rates at low levels for the next few years is working to keep cap rates down (and therefore prices up).  Additionally, the inventory/supply has been low - until there's data otherwise, it seems that demand is still outweighing supply, which is also keeping upward pressure on prices.  On the other hand, vacancy rates are increasing and rent rates are starting to slip, so even if cap rates do remain firm, that could have a negative impact on prices (lower annual net operating income at the same cap rate translates to a lower price).

We will continue to watch the market closely.  If you are interested in specific neighborhoods/areas or would like to discuss potential multifamily investments/sales, please feel free to contact us.  You can also start your search here with multifamily properties in Boston's "core" or multifamily properties in Boston's "emerging" neighborhoods.

 

 

 

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