For Boston-area renters groaning under some of the steepest rents in the country, there is a glimmer of good news: Things probably won’t get too much worse.
The rental market in Greater Boston may be topping out over the next few years, according to a forecast this week from online real estate marketplace Ten-X, formerly known as Auction.Com. The company expects rent growth to cool and vacancies to rise through 2019, as a new wave of apartments opens up and population growth remains relatively slow.
“It’s a classic supply-and-demand scenario,” said Rick Sharga, Ten-X spokesman and a longtime observer of the real estate market. “Population growth is running about at the national average. There’s not a huge amount of job creation. That will probably keep things in check.”
Boston-area rents have climbed more than 5 percent in each of the past two years. Those gains should slow to about 3 percent a year between now and 2019, Ten-X predicts, while the share of vacant apartments climbs from 5.5 percent last year to 8.1 percent in 2019.
Of course, that only helps to a point. Ten-X estimates average rents in the area will top $2,260 a month in 2019. In contrast, rents in Raleigh-Durham will grow twice as fast over the next few years, but still end up less than half what they are locally.
The report is the latest sign that Boston’s rental market may be plateauing, especially at the high end.
New buildings that have opened lately have been offering concessions such as a free month’s rent to woo tenants in a suddenly competitive market for luxury apartments. More developers are focusing their efforts on projects in outer neighborhoods, from East Boston to Quincy, as the high-end downtown market grows crowded.
And some not-yet-built projects that were initially conceived as apartments are shifting to condos, with developers sensing stronger demand from young professionals and empty-nesters selling suburban homes for a move into the city.
The Boston Redevelopment Authority last week approved switching a 76-unit building at National Development’s Ink Block complex in the South End from apartments to condos. And the developers of the Seaport’s so-called “M Block,” which is approved for about 750 housing units over 3.5 acres, will build about two-thirds of those units as condos, said Sue Hawkes, a veteran housing consultant who is working on the project.
It’s a natural shift at this point in a real estate cycle, Hawkes said.
Housing investors who want to cash out relatively quickly are betting they will make more selling condos, which are seeing prices surge right now, than they would selling an apartment building developed at the height of the market. But, she noted, there are lots of other investors with longer time horizons still betting on rent growth in Boston.Tim Logan can be reached at firstname.lastname@example.org. Follow him on Twitter @bytimlogan.