Looking Beyond Boston: What’s to Come in Lynn

“Lynn, Lynn the city of…” well, nevermind… Lynn, yes, Lynn slid into relevancy in the Greater Boston real estate development landscape over the course of 2018 and 2019. Based on its sheer population, and even its landmass (13.5 square miles), maybe this should not be surprising. Lynn is a city of nearly 95,000 which places it within the top 10 largest cities in Massachusetts. Geographically, it sits less than 10 miles from downtown Boston but less than 4 miles north of the Boston border by Suffolk Downs. A number of large scale projects slated to take place on the Lynnway and deeper into the city around the Central Square area have placed Lynn on a similar developmental trajectory as some other lesser thought of areas beyond Boston’s core (Hyde Park, Chelsea and even Beverly come to mind). 

In 2019, apartment rentals in Lynn averaged $1,825 per unit, which calculated to $2.08/SF. In comparison to 2015, these figures represent increases of 31.7% for average rent per unit and 34.1% for average $/SF. In today’s market, a renter could find a 3-bedroom in Lynn for $2,089 per month, which represents a 9.2% discount from nearby Chelsea, another on-the-rise market. 

On the sales side, in 2019, condo units in Lynn traded for an average of $283,431 or $272/SF. However, the vast majority of units planned for development within the next 3 to 5 years are positioning the city to have a robust supply of new apartment inventory. The most recent Census Bureau reporting suggests that 44.6% of Lynn’s residential housing supply is owner occupied. Compared to its neighbors like Saugus (80.7%), Peabody (64.5%) and Swampscott (77.9%), Lynn remains on the drastically low side of this statistic. Consistently, so does the city’s per capita income ($26,000, 2018) greatly lagging surrounding communities.  

Snapshot of Development Pipeline in Lynn, MA

The most impactful development in terms of sheer volume is 843 Lynnway. The $500 million project slated for the former General Electric Co. Gear Works site is expected to bring almost 1,300 apartment units to the 65.5 acre site. Perhaps more importantly, the project adds newfound accessibility and capacity to the Riverworks Commuter Rail station. A less-than 20 minute train ride to North Station would offer accessibility to Boston that Lynn area commuters have not previously had. This new found accessibility would be a boon for not only the residents of 843 Lynnway but also 810 Lynnway as well as other potential development sites nearby. MassDot is also currently studying the feasibility of extending the Blue Line into Lynn, adding yet another public transit service for the North Shore. Although the decision on whether these extension plans will be realized is expected to be revealed in spring of 2020, a history of failed attempts to extend the Blue Line are keeping expectations relatively low.

King’s Beach on Lynn Shore Drive

Anybody familiar with the active developers in the Greater Boston area would quickly point out that there are no “household” developers listed next to the projects currently in the queue in Lynn. The list is almost entirely made up of developers who operate out of Lynn and have a day job that has not, historically, been real estate development. The National Developments, Samuels and Davis Companies of the world are not quite ready to roll the dice on this (still) speculative market. Their focus remains in more established neighborhoods like Southie, Fenway and East Boston. This does not mean that well-known developers aren’t land banking in Lynn.  WS Development’s ownership of an 11.15 acre Walmart adjacent to 810 Lynnway and across from 843 Lynnway seems to be the site where an institutional developer could make a leap towards a large mixed-use development, but there’s no time frame as to when this could occur… and Walmart happens to be in a good business environment at the moment.

WS’s Walmart at 780 Lynnway sits on an 11.15 Acre Property

 A major question that developers need to wrestle with before investing in Lynn is whether they can achieve $3.00 to $3.50/SF for apartment rents. In real dollar terms, that typically equates to a one bedroom unit renting for $1,800 per month and a two bedroom renting for close to $2,600+ per month If those prices cannot be attained, the price of land and construction costs likely outweigh potential development returns. Between the ocean views and potential for prime transit oriented development, this figure doesn’t seem too far-fetched, but that doesn’t mean renters would be easily persuaded to move to Lynn when they could live closer to Boston for a similar price point. Pricing in Revere, Chelsea, East Boston and Charlestown are detailed in the chart below. As these prices rise, Lynn’s real opportunity should come into focus.

Pricing breakdown for rental units in Chelsea, Revere, East Boston and Charlestown

Navigating the Real Estate Market in COVID-19

As we make our way through this time of drastic uncertainty in Boston and beyond, we wanted to revisit property sales data from the last 15 years. Our hope is that this data may serve as a tool to evaluate the benchmarks that have shaped our perception of the Boston real estate market for a cycle and a half. Traditionally, less liquid real estate markets do not mirror the more liquid (and volatile) equity markets (S&P is down 23 percent from its peak in February 2020 as of this writing). We don’t expect any change in that regard as we work our way through what is likely to be downtimes for at least 6 to 12 months in Boston area real estate sales. It may even be comforting, to some, to point to the last downturn and observe that the bottom of that market occured in 2009 and was only a 7.75% drop from the peak pricing that was observed in 2006 and 2007 (coincidently, Boston averaged the exact same $/SF on condo sales in those two years). Most importantly, the growth that can be seen in the chart below over the last ten years is simply remarkable. Boston pricing (in terms of $/SF) AVERAGED 6.4% growth per year for a decade. Put another way, if you purchased a $1M condo in 2009, it is likely worth more than $1.85M in early 2020. Taking it a step farther, if you put 20 percent down ($200,000) on that $1M purchase, you would have quadrupled your equity in a decade! 

Boston Condo Data 2005-2019

As the global economy recovered following the Great Recession and the Boston housing market mapped its course ever higher, the average days on market (DOM) for each listing trended inversely. From 2006-2011, the average DOM for condos in Boston was 105, while 2013-2019 averaged 46. This 56% decrease can largely be attributed to an extremely healthy economy with vast employment opportunities, rising wages and increasing Boston population. Thus, the ultimate recipe: demand outpacing supply.  

Sale $/SF VS. Average DOM 2005-2019

Over this same period of time, the number of units sold hit its nadir in 2011 at 3,548, while the most sales were booked in the previous bull market of 2005 (4,687 total sales). In 2019, 4,372 units were sold (7 percent less than 2005 but 23 percent higher than 2011). Overall, the for sale inventory has remained relatively consistent over the last 15 years with an average of 4,250 sales per year.

Ultimately, the spring 2020 real estate sales market appears like it will be wiped out. With social distancing and isolation the themes of March and April, sales (and construction) will take a back seat until at least May and more likely June. At that point, the pent up demand for purchases (and sales) may be real but the impact this period of inactivity has on the economy is still to be determined. We will continue to monitor the economic and public health impacts from COVID-19 in its relation to the Boston Real Estate market and provide daily updates on any and all new happenings on our website. Stay well!

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