Boston rent growth and value growth: Where do we go from here?
Boston is one of the most dynamic markets in not only the country but the world. And yet, we are still relatively “cheap” when it comes to rents.
Boston is one of the most dynamic markets in not only the country but the world. And yet, we are still relatively “cheap” when it comes to rents. In fact, at just $61.85, Boston’s current urban core Class A rents rank far below other world-class cities like Hong Kong, Paris, NYC, Tokyo or San Francisco. Current CBD Class A rents are $10 below previous peak and rent growth this cycle is far below the growth achieved in previous shorter cycles. The common consensus as a result is room to run, lots of it.
“We’re looking at the highest probability of a correction between 2020 and 2021, and as our supply starts to deliver through 2020, we are at zero risk of oversupply,” said Julia Georgules, JLL New England Research Director. “This
is completely unique to our market. In Chicago, New York, D.C. and elsewhere, there are millions of square feet delivering. As a result, rent growth has slowed with so many more options available. Here in Boston, we still feel rents have room to run.”
JLL Downtown Boston Brokerage Lead Ben Heller agrees. “There is definitely room to run,” he added. “We’re seeing tenants have less leverage and fewer options and we definitely haven’t hit peak rents. There’s a mindset that owners can push rents higher and they will.”
“Boston’s rental rate growth prospects will feed directly into value growth,” added Frank Petz, JLL New England Capital Markets Managing Director. “Even in the face of rising interest rates, asset valuations will be enhanced as a result of rising income projections coupled with the insatiable demand for Boston real estate by investors globally.”