Look up and you’ll see the Boston skyline occupied by swank new apartment buildings and condo towers. The increasing pace of luxury real estate construction – focused on apartments and condos – has added a new dimension to the city’s property market.
Boston has thriving life sciences and technology sectors. It is home to some top-rated colleges and universities. Alongside New York and San Francisco, Boston has established itself as one of the most-favored global business destinations. These are just some factors that have supported its property market, especially in the luxury apartment category.
Looking to the future
Over 8,000 units are expected to come up in the city over the next three years. Jones Lang LaSalle says that the construction boom will double the supply of units built in luxury apartment complexes since the 60s.
The new buildings offer upscale features and amenities such as swanky roof decks, picturesque views and yoga lounges. The luxury comes at a cost – about $4000 a month for 800 square foot one-bedroom units. Landlords are optimistic about finding wealthy renters, and though there is a demand for apartments among renters across all income levels, a significant proportion of the construction is concentrated on the higher end of the market.
Reasons for the construction boom
The demand-supply imbalance is a key reason driving the construction boom and heightened interest from property investors. Between 2010 and 2012, the city’s population grew by 3 per cent, but a weak economy resulted in cautious investment in and slow development of luxury apartment and condo projects. The widening gap between demand and supply caused a spike in rent by almost 20 percent, attracting investors’ interest.
The country’s housing market meltdown also made apartments a less risky option, increasing the interest in this type of residential construction, which is somewhat of a rarity in Boston. Apartment buildings and condos in the city have been few and far between, with almost 50 per cent of its apartments dating back to the years before World War II. As of 2013, a dozen apartment buildings are being built in the downtown alone.
The question of price
Given the rising cost of land and construction, developers will find it difficult to keep rents down. The low cost housing you can get with some projects may save you up to $400 less than luxury apartments in the downtown. The cheaper ones located in neighborhoods outside downtown charge rents averaging anywhere between $2,000 – $2,500 a month. Some of the completed projects have witnessed robust occupancy, with all units being filled up quickly.
As more luxury apartments start dotting Boston’s landscape, the competition among landlords is expected to get tough. However, investors are optimistic that the demand will keep the market strong and the returns lucrative.
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