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!

Neighborhood Spotlight: Orient Heights, East Boston

How do neighborhoods blossom? Well, often a neighborhood’s rise (or renaissance) begins with competitive advantages in terms of being pedestrian friendly, offering services and restaurants and, perhaps most importantly these days, featuring transportation infrastructure. Orient Heights in East Boston checks all of these boxes. This East Boston neighborhood has scores of triple decker buildings that are likely to transition into condos in the coming years.  However, the larger opportunity for developers in this East Boston sub-neighborhood is the significant volume of underutilized, single (or two) story properties within 0.5 miles of the Orient Heights MBTA Blue Line Station. This particular station has low ridership statistics while offering access to Boston’s Financial District in well under 20 minutes. Moreover, Noyes Playground and Constitution Beach give the Orient Heights area even broader appeal for families and active professionals searching for access to recreation and the beach while still living in a decidedly urban location. 

Drone Image Taken by CNVRG Graphics

Focusing on Orient Heights development pipeline, Saratoga, Bennington, Boardman, Ford and Waldemar Streets are witnessing the majority of the current and near-future redevelopment. Directly adjacent to Constitution Beach sits an East Boston Savings Bank, Burger King, Subway and Neptune’s Laundromat (between Bennington and Saratoga Streets). Although there are no plans in place on these lots, the space is underutilized and would be an optimal location for a mixed-use or residential development. The total building area of these retailers makes up 22,424 SF, while the aggregated lots sit on 96,680 SF (2.22 Acres). This means that the current FAR (floor area ratio) of the combined lots is 0.23. These lots fall within a “Neighborhood Shopping” zoning designation, however the area is also marked as an Interim Planning Overlay District. Proposed projects in Interim Planning Districts will be evaluated with expected zoning changes rather than the current zoning. 

917 Bennington Street, which will bring 42 new ocean facing apartment units, achieved a 2.92 FAR. Nearby, 16 Boardman Street achieved a 1.83 FAR when they delivered 19 new condos in February of 2019. MG2 Group has proposed a development at 2 Ford Street that would aim to achieve a 2.98 FAR, however it has yet to be approved by the BPDA. The CB Equities development at 946 Saratoga Street is another project that may achieve an increased FAR depending on phase two development on the site. This dual phased development (known as The Tess, East Boston) has yet to release its plans for the second component of the project. Phase one features nine impressive luxury condominium units with parking and private outdoor spaces. 

Not unlike many other neighborhoods in Boston, a core explanation for the emergence of Orient Heights can be attributed to public transportation. The Orient Heights MBTA station is drawing the attention of developers to this formerly “sleepy” East Boston neighborhood. A downtown employee can reach their State Street office in approximately 17 minutes when departing from the Orient Heights station. An MBTA study showed that this Blue Line stop has 2,833 daily riders, whereas Maverick station down the tracks in Eastie has 10,106 daily riders. This substantial difference in station activity can be traced to the housing density in each area. While Maverick has seen heavy development in recent years, Orient Heights is only just beginning to develop in ways that will bring more residents and services (and, in turn, riders).

Beyond conventional developer preferences (access to transit, underutilized sites and generous zoning), Orient Heights has additional factors that prospective residents will find attractive: a state-managed beach with walking trails, a recently constructed playground, a hockey rink, playing fields and a handful of eateries and services. Constitution Beach is impressive to say the least. Located a short walk from the CB Equities project at 946 Saratoga Street is Noyes Playground, which consists of 8.31 acres worth of playing fields and walking paths. Local mom and pop restaurants such as Luna’s and Milano’s Deli complement other dining and coffee options in the vicinity. 

Orient Heights is, inevitably, in Boston’s multifamily development path of progress. A transit oriented development community with infrastructure for commerce and recreation is difficult to beat! East Boston has seen a dramatic rise in development since 2010 but there remains much “meat on the bone,” particularly in locations like Orient Heights.  CNVRG is a forward thinking real estate brokerage and consultancy. We’re always looking for the next “it” location and Orient Heights is poised to be something special. 

 

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