Here's the latest installment of Bates By the Numbers, a weekly feature by Boston real estate agent David Bates that drills down into the Hub's housing market to uncover those trends you would not otherwise see. Check out his ebook, Context: Nine Key Condo Markets.
The Masters of Greater Boston's Rental Universe gathered last week at Bisnow's annual Boston Multifamily Summit. Before a crowd of 500, several of the area's biggest landlords and most active apartment developers took on the Hub's hottest rental topics. Not surprisingly, the apartment-building boom—80 apartment communities and nearly 11,000 apartments in various stages of development or recent completion in Boston alone—and the micro-apartment, the most sought-after new style of apartment living since the term "loft" was coined, dominated much of the discussion.
Here are my favorite takeaways:
"The quality of the project and the quality of the location will be tested. … Not all of the projects are in a perfect location and those are the ones that may take it on the chin earliest."
—Bruce Percelay, the CEO of Mt Vernon Company (1,500 units in Greater Boston), expressing his concern about the unprecedented amount of luxury apartment developments going up.
"Do you see what I see, those black clouds? One says 'over supply.' …The other says 'business downturn'. ... There's one more black cloud: 'Interest rate increase.'"
—Harold Brown, the CEO of the Hamilton Company (5,500 Greater Boston apartments). While some were giddy that the market and demographics looked great for developers, Brown cautioned his peers that great markets don't last. In the business 60 years, Brown has witnessed many surprising downturns, but certainly not the 1632 Tulip Market Crash he told the audience he remembered.
"We rent to folks who realize that savings may be important."
—Adelaide Grady, the director of Wood Partners, a Boston company which has five construction projects in Greater Boston totaling 1,100 units and specializes in apartments for folks who are "priced out of the center of things." Another panel member noted a report that asserted 50 percent of the people between the ages of 24 and 35 had zero savings available for a down payment.
"Our micro-unit was that we found the cheapest two-bedroom we could and jammed in as many kids as we could."
—Michael Roberts, vice president of development at Avalon Bay Communities, recalling apartment life in Cambridge and Somerville in the '80s and '90s.
"[In 2003, we were told] 'in Boston we don't do studios, nobody will ever rent them.' Well, just guess what? They rent the best and now everybody does studios in Boston."
—Alex Twining of Twining Properties, which has projects in Cambridge, the Seaport and Quincy and admitted he was "worried" about micro-apartment development, but also shared the above insight.
"There is clearly demand for [micro-apartments] today. … There are a lot of very fine details that have to go right to make it successful—location certainly one among them but all kinds of aspects of design that really kind of make the difference whether they are going to offer kind of that unique value proposition to the person that is going to live there that kind of offsets that lack of size."
—Kelly Saito, president of Gerding Edlen, a company that just opened 315 on A in Fort Point.
"Let's look at value over the last 60 years. Apartments that we purchased 30, 40, 50 years ago for $6,000 … a unit are now worth $250,000, $300,000 a unit."
—Harold Brown, who then articulated his thoughts about what it takes to succeed in real estate: "stay alive."
· Our Bates By the Numbers archive [Curbed Boston]