Tomorrow will mark exactly 7 months from the day the Fenway vacancy rate began its jaw-dropping blastoff as a result of the pandemic, remote learning, and the international travel ban. The pivotal 9/1 leasing date came to pass, and Fenway saw the usual number of students moving out as their apartment leases expires. Only this time, there were no students moving in.
As a result, the vacancy rate for Fenway apartments rose from 3.38% on August 31 to an unthinkable 17.87% by September 8. All of a sudden, one of Boston’s best areas to live was in a situation where 1 out of every 5 apartments lay empty.
The Fenway apartment rental market is no stranger to high turnover. As you can see from the preceding graphic, September always brings a spike in vacancies in Fenway as well as the entire City of Boston. Boston Pads has reported that as many as 60% of apartment leases in Boston begin on September 1. Beantown may run on Dunkin’, but the Boston apartment rental market runs on the 9/1 leasing cycle.
So in a neighborhood like Fenway, which is home to Boston University, Emmanuel College, Simmons University, Colleges of the Fens, and is right next door to Northeastern University, you can bet that a large majority of leases are hinged on the September 1 move-in date, hence the dramatic increase in apartment supply. After a decade of steady rental market growth in Fenway, demand for off-campus housing near Boston University vanished out of thin air.
Since then, the Fenway housing market has absorbed a large margin of those vacant apartments. The vacancy rate now is sitting at a more manageable 8.4%, but it still marks a 1,020% increase since the last week of March in 2020.
The Fenway vacancy rate of 8.4% is the 3rd highest out of all Boston neighborhoods, behind only North End (8.51%) and Downtown Boston (24.06%). The +1,020% change in vacancy rate in Fenway is the second biggest YOY jump out of all neighborhoods with the exception of, you guessed it, Downtown Boston (+2,730.59%).
Apartment Availability Rates in Fenway - No Relief In Site…Yet
If you were looking for some optimistic news as to where the apartment rental market in Fenway is headed in 2021, you certainly won’t find it in the Availability Rate. The current real-time availability rate for apartments in Fenway is a whopping 22.22%, the 3rd highest in Boston behind Downtown (25.69%) and nearby Allston (26.43%).
In a normal year, the availability rate is a great indicator of where the apartment rental market is headed. Instead of showing the percentage of empty/vacant apartments, it shows the total number of available apartments. So it includes both currently vacant units as well as apartments that are currently occupied but available to be rented on a future lease date. In comparison to the vacancy rate, it shows us how many available apartment listings are currently vacant vs. occupied, and it also shows how newer inventory is being absorbed as it becomes available on the market.
In Fenway, if you look at the data, it doesn’t paint a good picture. Historically, apartment availability peaks in Fenway in late April and early May, as students completing their second semester notify their landlords of their intent to vacate in September. So, if we’re sitting at 25.69% now, it’s not unthinkable to imagine an availability rate climbing to over 30% before May. But again, I’m speaking in terms of a normal year, which this is far from reality in 2021.
Predicting Apartment Supply in Fenway for 2021
The real underlying force that’s keeping availability and vacancy rates high is the uncertainty of the fall semester in 2021. Most universities have not been clear or definitive in regards to remote learning policies for the fall. Students and landlords especially are holding their breath for updates, but we haven’t heard any yet. If May comes to pass without local Universities announcing a plan, don’t expect the apartment availability rate to begin to dissipate over the summer as it normally does in Fenway.
On the positive side of that observation, if a few schools do scale down remote learning by any significant amount, it will provide relief to the rental surplus being experienced here in Fenway as well as in nearby Allston, Mission Hill, Symphony and Back Bay. Restoring demand to these areas would be as simple as flicking on a light switch.
In the meantime, landlords have been hesitant to drop rent prices for fear of the market making a strong comeback. For that reason, Fenway rent prices have only fallen 7.5% year-over-year despite seeing a drastic increase in supply. Instead, we’ve seen landlords become much more flexible in their lease agreements to avoid price reductions. Many landlords are allowing renters to sign irregular lease terms, eliminate deposit and broker fees, and even start a lease with a few months rent free in some cases.
In fact, at the time of writing there were 1,480 Fenway apartments available for rent. Out of those, there were 1,114 no fee apartments in Fenway that were listed as available. So well before the Fenway leasing rush begins in the summer, we’re seeing that 75.27% of available apartments in Fenway have already either partially or fully waived the broker’s fees. In a healthy market, less than 5% of landlords will pay the broker’s fee. Let that sink in.
It’s for this reason that the 7.5% decrease in average rent price in Fenway is not the full story. When a landlord offers to pay a brokers fee or provide free months rent as an incentive, they are likely losing more than 7.5% of their income on the property over the course of the lease, even if they rent it at the same price as the previous tenant. So while the average of the actual agreed upon rent price has dropped 7.5% since March 2020, the average Fenway renter is saving much more than that over the course of the 12 month lease in most cases.
One thing is for sure, 2021 will be a rare renter's market in Fenway and Greater Boston as a whole. The housing data shows that demand has shifted in 2020 towards buying houses in Boston's suburbs. That means renters are finding deals on apartments in Boston that haven’t been around since the crash of 2008. 2021 could be the year you find an apartment in a neighborhood you thought was too expensive. We’ll continue to report on this story as it develops.