FEATURE ARTICLE, NOVEMBER 2005

LIVIN' IT UP IN BEANTOWN
Many factors point to a continued strong Boston condo market.
John Fahy

John Fahy

And for good reason. This year, condo sales are on track to set a record of more than $3 billion in Boston, Cambridge and Brookline, according to Northeast Apartment Advisors. That's compared to a phenomenal $2.9 billion in sales last year.

With such impressive growth already, one may wonder how long and far the Boston-area housing market will soar. Although year-to-date condo sales are marginally lower than 2004 levels, they still remain higher than 2003 levels. And, additional factors point to continued long-term strength in the market, ranging from the economy to baby boomers to emerging neighborhoods — all coupled with the strong underlying fundamental that Boston and Cambridge are very livable cities with much to offer.

First, while the national economy has been on the rise, mortgage rates have been falling. The 30-year mortgage rate has been dropping during the past few years to the current 5.7 percent. That's despite the fact that the Federal Reserve has been pushing short-term interest rates higher. Thus, with mortgage rates expected to remain low through fall, people who have been sitting on the fence likely will jump into the home ownership market before the window of opportunity closes. Similarly, many investors continue to view the residential real estate market and its low interest rates as a less risky investment than the stock market.  

Added to the favorable economics is migration. After deserting cities more than 50 years ago for the hassle-free spaciousness and convenience of the suburbs, empty nesters and their baby boomer offspring increasingly are trading in high-maintenance, large homes with yards and long commutes for the convenience of condo city living. Many of these buyers have plenty of purchasing power, to which the downtown markets have responded with luxury condos and multimillion-dollar units being built specifically with that market in mind.

For those with a more pioneering spirit and lighter wallet, a bevy of more affordable condos are rolling onto the market and expanding the footprint of Boston's residential neighborhoods. Often located in previously overlooked neighborhoods, successful “entry-level” developments offer younger buyers a unique combination of new product (often “loft” spaces in converted industrial buildings), close proximity to the various lines of the city's subway, on-site parking, and often a view amenity such as a park or courtyard.

For example, Gateway Terrace, a condominium loft project to be completed this year on the edge of the South End, includes 266 units ranging from $320,000 to $1.2 million. Buyers have been undeterred by the neighborhood's raw, industrial edge and have been signing up for units, knowing that the development's SOWA (South of Washington Street) district location is well on its way from being downtrodden to de rigueur. Similarly, the sales pace of the 217-unit loft development at Porter 156 in East Boston has benefited from its convenience to the newly renovated Airport T Station, and direct views of a new 10-acre park or downtown Boston. Proximity to the airport is at worst a neutral aspect of the development and arguably for some buyers a positive selling point in and of itself. Both Gateway and Porter are largely sold out prior to completion of construction, which is scheduled for later this year on both projects.

Whereas Gateway extends the southern residential boundary of the South End, the entry-level development SoCo Lofts on Northampton Street is scheduled to break ground this year and will act as a catalyst to establish residential development to a block west of Massachusetts Avenue that had previously housed a warehouse and parking garage. Likewise, the recently announced 86-unit SoHa Lofts on Albany Street is attempting to push the residential southern boundary of the South End right up to the Southeast Expressway.

Similar developments can be found in up-and-coming enclaves of Jamaica Plain, Charlestown, South Boston, the North End and Cambridge. These areas each have a distinct flavor and unique offerings. Plus, they all benefit from proximity to downtown Boston's and Cambridge's historic charm and many amenities: world-class universities; museums, theaters and galleries; sail boating on the Charles River; shopping on Newbury Street; and, of course, Fenway Park and the Boston Red Sox. Fundamentally, the livability of Boston and Cambridge should continue to underpin the demand for and prices of residential condo markets in the downtown neighborhoods.

John Fahy is a vice president in the Commercial Real Estate Division at Citizens Bank of Massachusetts.


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