Boston Posts Elevated Multifamily Rent Growth in the First Half

The multifamily market in Greater Boston is posting mixed performance trends, where rents gain ground even during a period of modest increases in area vacancies. Deliveries since 2020 have averaged nearly 9,000 units per year, about 50% higher than the annual averages during the prior decade. That pace has continued through the first half of this year. As new supply outpaces absorption, the vacancy rate has gradually climbed. Class C properties have been largely unaffected by supply-side pressures, posting stable occupancy and steady rent growth as renters seek value in a high-cost market. Favorable demographics are proving to be a stabilizing force in the rental market. In 2024, Boston recorded its largest net population gain in more than 20 years, and the metro’s growth rate now consistently outpaces the national average. With more than half of adults holding a bachelor’s degree or higher and household incomes nearing $120,000, Boston remains a high-demand, high-income market.

Investment activity in the Boston metro area has been driven by a shift toward lower-tier assets. Over the past year, Class C properties accounted for nearly half of all transactions, with deal volume in this segment nearly doubling. With activity picking up, pricing for Class C assets rose 5% year over year, the strongest gain across asset classes. A rise in Class B trades during the second quarter pushed the overall market median to $297,400 per unit, slightly higher than in either of the previous two years. Renter demand and development remain concentrated in less expensive submarkets like East Middlesex, South Essex, and Marlborough-Framingham, which are expected to deliver over 2,000 units in 2025. These areas, largely composed of Class B and C properties, reflect a broader investor focus on value and long-term growth potential.

Looking ahead

Boston area multifamily property fundamentals are expected to remain relatively stable through the second half of 2025, particularly in suburban submarkets where absorption has been strong. Employment growth is projected to level out in the coming months following recent headwinds tied to layoffs in the life science and tech sectors, after rapid expansions. However, steady gains in the education sector are expected to support continued demand. On the supply side, apartment completions are set to increase in the back half of the year, marking the largest inventory addition since 2020. Still, permitting activity has slowed, suggesting future supply growth is likely to moderate after current projects in the pipeline are delivered. Despite some potential supply-demand challenges in the near term, the region is forecast to post stronger rent growth than in the past two years.

The investment market in Greater Boston may be poised for some additional activity in the coming quarters. Cap rates have largely stabilized between 5.5% and 6.5% following last year’s upward trend, a level that may help bring more buyers back into the market. With uncertainty lingering in the office and life sciences sectors, multifamily remains a preferred asset class due to its relative stability and expectations for rent growth that is likely to outpace much of the nation’s largest markets. Momentum is likely to build through the second half of the year, especially in the Class C segment of the market where properties under $20 million continue to draw interest from yield-focused investors.

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