It’s been a roller coaster two years for Boston’s most expensive apartment rental market, Back Bay. Prior to the pandemic, Back Bay was experiencing record lows in apartment availability and vacancies alongside all-time high average rent prices. Then in 2020, COVID-19 dramatically increased the apartment supply. The real-time vacancy rate (RTVR) for Back Bay apartments was launched sky-high, eclipsing the 7% mark in September 2020 for the first time on record. Then, starting in March of last year, the RTVR rapidly contracted. By September of 2021, Back Bay had set a new all-time low RTVR.
Back Bay Vacancy Rate Volatility
It’s no secret that remote learning, remote work policies, and the collapse of the short- term rental market were the cause of the apartment supply upheaval in Back Bay. The RTVR catapulted to a record high 7.67% in mid-September 2020 just as campuses were shutting down due to COVID. In the year that followed, we saw the market absorb a jaw-dropping 97% of those vacancies. By late August 2021, Back Bay’s RTVR hit a new all-time low of 0.24%.
It didn’t stop there. By mid- December, the Back Bay RTVR dipped even lower as it hit 0.17%. Now that figure rests at 0.32% with more than 4 months until it hits its historical annual low point in late August. With vacancy figures like this in early April, it’s not unrealistic to predict that Back Bay will hit 100% occupancy by the end of the summer leasing season.
Back Bay Apartment Availability
That vacancy rate was not the only apartment supply metric to surpass historical lows in the last year. The real-time availability rate (RTAR) hit an all time low of 1.13% in late August 2021, the same week the RTVR hit its historical low point. Now, the RTAR for apartments in Back Bay rests at 2.39%, which is -46.17% lower than its pre-pandemic level of 4.44% during the first week of April 2019.
Apartment availability is a good predictor of future market supply. By the looks of the most recent Back Bay apartment data, it looks like we’re headed for a significant shortage in apartment supply as we approach the summer leasing season. That can only mean prices will be on the rise in Boston’s most expensive rental market. You also have to consider that labor and material costs have risen quite rapidly in all sectors of real estate repair and maintenance. This recent inflation factor alone is causing property owners in the Back Bay to have no alternative but to raise their rents to offset huge increases in costs.
Back Bay Average Rent Prices
If there’s one positive to draw from the market disruption Back Bay endured, it’s that it provided a small window of relief for renters in terms of lower rent prices. Just a year ago, Back Bay’s average rent price had dropped by 10.87%, one of the largest year-over-year rent drops in all of Boston. Now a year later, that average rent price has recovered nearly all of the ground it lost during the pandemic. The current average rent price in Back Bay is $3,611, a 10.18% year-over-year increase since early April 2021. We will have to monitor how high energy prices impact rents. There are still numerous buildings throughout the area where the landlords pay the utility bills and rising prices will most likely have to be offset in some capacity.
Back Bay is still the most expensive neighborhood to rent an apartment in Boston by a wide margin. The closest neighborhoods are Downtown ($3,392) and South End ($3,301).
2022 Back Bay Rental Market Predictions
The current average rent price in Back Bay is still $201 under its all-time high of $3,812 set in February of 2019 . At the current pace of price growth, Back Bay would eclipse that mark sometime in September of this year. However, the record low apartment supply suggests that price growth may begin to accelerate as the summer leasing heats up. There are numerous factors to consider there including how many tenants renew their leases from the following years. The picture will become much clearer as we approach the June time frame.
Given the record low RTVR and RTAR we are currently seeing in Back Bay, it’s not unlikely that Back Bay’s average rent price will break its previous record by July or August this year. Given the complete lack of developable land in Back Bay and the fact that most new developments are luxury focused, don’t expect that the supply of affordable housing to increase anytime soon in Back Bay. We may even see Back Bay’s average rent surpass the $4,000 mark before years end. Inflation can always be hard to predict accurately with rising energy, material and labor costs.