Apartment Vacancies Continue to Rise in Boston

Supply-side pressures and employment reductions among white-collar sectors are driving vacancy higher in Boston's Class A apartments, while demand for more affordable housing continues to support steadier operations in the lower tiers, according to a fourth-quarter Apartment Research Report by Marcus & Millichap. Since the beginning of the year, nearly 50 percent of job cuts in the metro have occurred in white-collar segments such as government and professional and business services.

"Investment activity in Boston is expected to remain constrained through the end of the year as a result of buyers' uncertainty over the near-term direction of the local economy," says Gary Lucas, regional manager of the Boston office of Marcus & Millichap.

Following are some of the most significant aspects of the Boston Apartment Research Report:
- This year, employers are expected to cut 65,000 workers, a 2.7 percent decrease in payrolls and up from the loss of 35,000 jobs in 2008.

- Developers are projected to deliver 3,400 apartment units in 2009, down from 4,200 units last year. During the past five years, annual completions have
averaged 3,800 units.

- Ongoing construction and weaker demand stemming from job losses will push the vacancy rate higher through year end. In 2009, vacancy is forecast to rise 110 basis points to 7.1 percent.

- Asking rents are expected to drop 1.5 percent to $1,715 per month this year, while effective rents will fall 2.4 percent to $1,613 per month. In 2008, asking rents gained 3.6 percent, and effective rents rose 3.2 percent.

For a copy of the complete Boston Apartment Research Report, as well as reports on other markets nationwide, visit www.MarcusMillichap.com