Residential and Commercial Rents Drop in Boston and Cambridge 

September 11, 2020 Pace LaVia

The big news this week is about Boston’s plummeting residential and commercial rental market. Landlords are reportedly “panicking” as rents nosedive in Boston and Cambridge due to an exodus of renters.

The hardest-hit neighborhoods are seeing as much as a 7% drop. Office landlords are not faring much better as commercial rents continue to plummet as well.

The vacancies and falling rents are the result of a combination of a drastically reduced student population, more businesses allowing employees to work from home, and more rentals coming online.

Here are some statistics on the drop in residential rents:

There has been a 7% to 9% increase in vacant apartments since COVID-19 hit.
Rents have fallen by 6.9% in Boston’s central business district.
The most expensive neighborhoods in Cambridge and Boston have seen prices drop by about $150 a month on average.
1,300 three-bedroom apartments are available in Allston alone, 1,200 more than a year ago.
20% of landlords are now offering “sweeteners” and concessions, up from just 6% pre-pandemic.

In order to sweeten deals, landlords are adding bonuses such as free parking, dropping cosigner requirements, waiving security deposits, and giving away up to three months gratis, according to Clark.

Adin Perera, a senior market analyst with the CoStar Group, which runs the listing site Apartments.com had this to say about the situation:

“Until cities are ready to run at full-tilt again, we’ll see demand and rent struggle because they live, work, play dynamic that boosted not just Boston, but all major dense cities … has gone away amid the pandemic. It’s really a good time to be a renter. You can get a great apartment in Fenway, Back Bay or Beacon Hill for Allston-Brighton prices,” said rental agent Mark Coronado of East Coast Realty.”

And Zillow Group economist Joshua Clark commented:

“This is a story about competition. It’s been stacked against renters for a very long time and for the first time in about a decade, we’re seeing a flip. There are less people out there looking for rentals and a lot of people looking to fill up their vacancies.”

These are the neighborhoods with the steepest declines in rent:

Alewife down 7% to $2,729 from $2,936.
Harvard/MIT drops 6.46% to $3,144 from $3,362.
Downtown Boston slips 6.31% to $3,518 from $3,755.
South Boston/Seaport falls 5.19% to $3,651 from $3,851.
JP/Roslindale/West Roxbury down 4.88% to $2,191 from $2,303.

The full list can be found here.

To the chagrin of Boston’s landlords, a U.S. District Court Judge Mark L. Wolf has said he is likely to deny landlords’ attempt to block the Massachusetts eviction moratorium. The moratorium allows renters to stay in the apartments if they can’t afford to pay rent due to COVID-19.

The moratorium took effect in April. And Baker extended the moratorium to Oct. 17. A Massachusetts Supreme Judicial Court sided with the Baker administration in August, with the caveat that landlords can still sue for breach of contract or take other legal action.

The moratorium drew the ire of a coalition of landlords who claim that some tenants who can afford to pay rent are taking advantage of the moratorium and that the situation could have a snowball effect if landlords, in turn, cannot pay their mortgages.

Meanwhile, commercial rents have plummeted as many businesses “reconfigure or do away with traditional office spaces altogether and as new construction continues to come online amid a stunted economy and waning demand,” according to a Boston Herald report.

Aaron Jodka, managing director of research and client services at Colliers International had this to say:

“The second quarter saw the worst negative absorption rate in Boston’s history. There were more tenants moving out of office space during that time than we’ve ever seen before. The only comparable time periods would be during Sept. 11 and the tech bust in the fourth quarter of 2001.”

Here are some statistics provided by CoStar Group:

Median rents for office listings were up 3.6% in January and 2.9% in February, then dropped 2.8% in March and 9.1% in April.
In May and June, rents rebounded slightly, increasing by 2% and 2.8%, respectively.
Rents dropped again by 2.8% in both July and August.

To make matters even worse, an additional 900,000 square feet of sublease space has come online since March 31.

The biggest spikes in available subleases fall in the Financial District, Back Bay, the Seaport District, East Cambridge, and Kendall Square, accounting 3.5 million square feet of the region’s sublease space.

South Boston Edison Moves Forward with Power Plant Redevelopment Project

Developers seeking to replace the deserted power plant along L Street in South Boston have said they hope to move forward with a project to develop condos, office space, hotels, and retail spaces on the site. The Boston Planning & Development Agency voted to allow the project to progress last month.

The project, to be undertaken by Redgate and Hilco Redevelopment Partners is planning the following in the 1.8 million-square-foot development:

635 apartments and condos
960,000 square feet of office and research space
80,000 square feet of retail space
240 hotel rooms
Up to 1,214 parking spaces.

Not everyone is in favor of the plan. Several elected officials have taken issue with the project including State Sen. Nick Collins who called the move “premature,” citing traffic, open space, waterfront access, and impact on the nearby Conley Terminal as the top concerns.

To further complicate matters, the Massachusetts Port Authority has the right to deny any residential development on the power plant site. A spokeswoman for MassPort commented: “There is an ongoing process to see what the development will be on that site. MassPort has committed to a public process should residential be approved there.”

According to the report in the Boston Herald, the project is far from a done deal as the BPDA’s recent decision is only “the first in what will be a long series of meetings, approvals, and chances for public comment.”

Hearings could begin next month. Meanwhile, CoStar’s Perara predicts a full recovery for Boston’s residential and commercial markets could take three to four years.

More than 100 Municipalities Receive Green Communities Grants

A total of 103 Massachusetts municipalities in the Greater Lowell and North Central Massachusetts regions have been awarded a combined $13 million in Green Communities 2020 competitive grants.

A total of 271 Massachusetts cities and towns have met the criteria to earn the Green Communities designation, making them eligible for grant funding under the Green Communities Act.

The grants are being awarded to municipalities that have already received the designation of Green Communities under a Department of Energy Resources competition.

These are some of the communities that recently received grants:

Ashburnham, $10,620
Chelmsford, $100,000
Littleton, $200,000
Lancaster, $200,000
Leominster, $68,490
Lunenburg, $69,361
Pepperell, $167,129
Tewksbury, $68,382
Westford, $95,000

The Department of Energy Resources has awarded over $136 million to Green Communities Since 2010.

A complete list of grant recipients can be found here.

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