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Investment Trends
Local Apartment Yield Trends • Limited listings in Back Bay/South End and Downtown are
elevating property values considerably in both areas. Investors
Apartment Cap Rate 10-Year Treasury Rate
are primarily bidding for smaller properties of less than 100 units
that were built prior to the 1970s. Construction of several larger
8%
complexes is underway in proximity to these areas, potentially
6% providing investors additional opportunities at the top end of the
market moving forward.
Rate
4%
• Higher returns and lower entry costs continue to sustain
2% demand north of the core. Properties in Chelsea and in Lynn
were particularly targeted during the past 12 months. Both
0% cities respective submarkets experienced considerable vacancy
* 00 02 04 06 08 10 12 14 16 18*
improvement during this time. First-year returns in these areas
averaged at least 100 basis points higher than those found in
most neighborhoods of Boston.
Sales Trends
Sales Price Growth • Metrowide, strong demand has placed downward pressure
on cap rates, averaging in the low-5 percent band in the third
rice per Unit (000s)
$170 0%
Boston
3Q18 – 12-MONTH PERIOD
Employment Trends EMPLOYMENT:
Local Apartment Yield Trends
Metro United States 1.7%
Apartment Cap Rate
increase 10-Year
in total Treasury RateY-O-Y
employment
4%
Year-over-Year Change
•
8%Approximately 47,100 positions were created since last
3% October, building on the 39,400 jobs added the prior year.
6%
The jobless rate remains in the low-3 percent band, mak-
2%
ing it difficult for employers to find quality workers.
Rate
4%
1% • Hiring was led by the professional and business services
2%
sector, which created 21,200 positions during the past
0% 12 months.
0%
14 15 16 17 18* 00 02 04 06 08 10 12 14 16 18*
Year-over-Year Growth
8,600 apartments were added to inventory
$255 8% the past
Units (000s)
9
12-month period ending in September.
$170 0%
6 • More than 14,700 rentals are underway with deliveries
scheduled through 2021. The largest -8%
$85 project completed
3
so far this year is the 447-unit Montaje located in the
0 Cambridge/Somerville submarket. -16%
$0
14 15 16 17 18* 14 15 16 17 18*
6%
Metro United States 50 basis point decrease in vacancy Y-O-Y
5%
• After remaining flat the prior year, metrowide vacancy fell
Vacancy Rate
* Forecast
Multifamily Research | Market Report
DEMOGRAPHIC HIGHLIGHTS
3Q18 MEDIAN HOUSEHOLD INCOME 3Q18 AFFORDABILITY GAP MULTIFAMILY (5+ Units) PERMITS
*Mortgage payments based on quarterly median home price with a 30-year fixed-rate conventional mortgage, 90% LTV, taxes, insurance and PMI. **2017-2022 Annualized Rate
the past
8% 12 months.
South Essex County
3% 2.3% -100 $1,813 -0.5%
SUBMARKET TRENDS
four quarters
4% to $308,300 per unit.
Marlborough/Framingham 2.9% -40 $1,813 4.9%
1%
Outlook: Boston’s several major colleges and universities
2%
North Essex County 2.9% -100 $1,672 5.2% will sustain demand for apartments, particularly near
0%
Cambridge.
0% Here, properties changed hands upwards
14 15 16 17 18* 00 02 04 06 08 10 12 14 16 18*
Chelsea/Revere/
3.1% -570 $2,319 6.9% of $500,000 per unit on average.
Charlestown
$340 16%
12
Year-over-Year Growth
9
Rockingham/Strafford
3.5% 80 $1,332 2.9%
Counties $170 0%
6
Waltham/Newton/Lexington 3.7% -10 $2,730 7.4% $85 -8%
3
5%
e
Multifamily Research | Market Report
CAPITAL MARKETS
Fed meeting. After the Federal Reserve lifted overnight rates and
Apartment Mortgage Originations maintained a positive economic outlook, long-term interest rates have
By Lender pushed higher. The 10-Year Treasury yield has quickly traded toward
100% the 3.25 percent range, which is prompting lenders to pass on the
increased cost to borrowers. However, fierce competition for loans is
Percent of Dollar Volume
75% Gov't Agency also leading to some cost absorption among lenders. While greater
Financial/Insurance
Atlanta borrowing
Office: costs may prompt buyers to seek higher cap rates,
Columbus Office:strong
Reg'l/Local Bank
50%
Nat'l Bank/Int'l Bank
economic performance should enable rent growth above inflation. As
CMBS
Michael Fasano
a result, First Vice
sellers President/Regional
remain committedManager Michael
to higher asking Glass
prices, First Vice
which is Preside
1100 Abernathy Road N.E., Bldg. 500, Suite 600 5005 Rockside Road, Suite 1100
Atlanta, widening
GA 30328 an expectation gap as property performance andOH demand
25% Pvt/Other
Independence, 44131
trends | remain
(678) 808-2700 positive.
michael.fasano@marcusmillichap.com (216) 264-2000 | michael.glass@marc
0%
14 15 16 17 18* • The capital markets environment continues to be highly
Austincompetitive.
Office: Government agencies remain the largest source of
Dallas share.
funds, commanding slightly over 50 percent market Office:National
* Through 2Q
Include sales $2.5 million and greater
Craig and
Swanson Vice President/Regional Manager
regional banks control approximately a quarter of theFirstmarket.
Sources: CoStar Group, Inc.; Real Capital Analytics 9600 North Mopac Expressway, Suite 300 Tim Speck Vice President/Di
Pricing
Austin, TX 78759resides in the high-4 percent realm with5001 maximum leverage
Spring Valley Road,of
Suite 100W
75 percent.
(512) 338-7800 | craig.swanson@marcusmillichap.com Dallas,
Portfolio lenders will typically require TX 75244
loan-to-value ratios
(972) 755-5200 | tim.speck@marcusm
National Multi Housing Group closer to 70 percent with interest rates in the low-5 percent range.
Baltimore Office:
The passage of tax reform and rising fiscal stimulus will keep the U.S.
Visit www.MarcusMillichap.com/Multifamily Fort Worth Office:
Mattheweconomy
Drane growing,
Regional underpinning
Manager strong rental demand and supporting
100 E. Pratt St., Suite
a national 2114
apartment vacancy rate of 4.6 percent at the
Kyle end ofVice
Palmer 2018.
President/Regi
John Sebree Baltimore, MD 21202
First Vice President, National Director | National Multi Housing Group 300 Throckmorton Street, Suite 1500
Tel: (202) 536-3700 | matthew.drane@marcusmillichap.com (817) 932-6100 | kyle.palmer@marcu
Tel: (312) 327-5417
john.sebree@marcusmillichap.com
Boston Office:
Denver Office:
Prepared and edited by
Tim Thompson Regional Manager
100 High Street, Suite 1025 Skyler Cooper Regional Manage
Catherine Zelkowski Boston, MA 02110 1225 17th Street, Suite 1800
Research Analyst | Research Services (617) 896-7200 | tim.thompson@marcusmillichap.com Denver, CO 80202
(303) 328-2000 | skyler.cooper@marc
For information on national apartment trends, contact: Charleston Office:
John Chang Benjamin Yelm Regional Manager
Senior Vice President, National Director | Research Services Detroit Office:
151 Meeting Street, Suite 450
Tel: (602) 707-9700
Charleston, SC 29401 Steven Chaben Senior Vice Presid
john.chang@marcusmillichap.com
(843) 952-2222 | benjamin.yelm@marcusmillichap.com Two Towne Square, Suite 450
Southfield, MI 48076
Price: $250
Charlotte Office: (248) 415-2600 | steven.chaben@marc