I got this from CPN.
Apartment assets in outlying areas of the Boston metropolitan area should see competition from the shadow rental market, but core assets are predicted to outperform, according to a recent Marcus & Millichap Real Estate Investment Services Inc. report. A major question, though, is how job losses will affect the city's multi-family market.
It will certainly suffer as the U.S. recession tightens its grip because renters are likely to transition into less-expensive housing. Class A properties in the outlying suburbs of North Shore and Mystic River North/Route 128, both of which prospered during the housing boom, will compete with shadow rental stock throughout this year, pushing vacancy higher. Lower-tier apartments in Cambridge/Watertown and Brookline/Brighton are predicted to fare well, owing to student demand and renters seeking affordable housing options close to the city.
The report found that investment trends are likely to take two forms in 2009: Demand for stable assets in close-in submarkets should remain robust, and properties in tertiary areas will face challenges. Indeed, some of those difficulties may create buying opportunities, as properties that were acquired during the height of the market with aggressive underwriting will appeal to bargain hunters.
The volume of apartment sales in 2009 is likely to equal 2008's, according to Simon Butler, executive director for Cushman & Wakefield Inc.'s Boston office. As in many other U.S cities, a gap between seller and buyer pricing expectations still exists. "Both sides are trying to find a happy medium," he said. Many sellers have what he called "embedded gains" owing to strong operating fundamentals in recent years, so sellers can sell for a lower price than they originally planned and still come out ahead of the game.
Marcus & Millichap has downgraded Boston in its National Apartment Index 12 spots for 2009, ranking it 24th among major U.S. metropolitan areas, as the firm predicts rising vacancies and a weakening job market.
Boston's job losses form the great unknown, Butler noted.
"If you knew this was the bottom of the recession, this would be a great time to buy," he said. "But no one can answer that question." According to a study from the U.S. Conference of Mayors and The Council for the New American City, Boston will suffer the fifth-highest amount of job losses in the country, its employment base of 2.5 million shedding 58,500 jobs, or 2.4 percent, and unemployment increasing to 6 percent by the end of 2009.
However, a silver lining to the economic distress is that the capital crunch has limited new apartment supply entering the market. After developers delivered 3,300 apartments in 2008, only 2,100 apartments will hit the market n 2009, according to Marcus & Millichap. Thus, Butler said, apartment owners should be in a good position when the economy gains traction and demand intensifies.