BOSTON–The Greater Boston multifamily housing market is entering a period of cooling and recalibration, according to Colliers’ latest Q3 2025 Multifamily Report, which outlines rising vacancies, slower rent growth, declining construction activity, and broader economic pressures that could shape the market’s trajectory heading into 2026.
Rent Growth Slows as Vacancies Reach 6.3%
Colliers reports that rent growth in the Boston metro continues to decelerate, slipping from 2.1% year-over-year to 1.1% in the third quarter. At the same time, the vacancy rate climbed to 6.3%, marking a 70-basis-point increase.
The rise in vacancies is tied in part to a 3.8% increase in inventory over the past year, intensifying competition among properties and prompting an uptick in concessions.
Despite these pressures, the firm notes that demand remains “resilient” as macroeconomic uncertainties—including high borrowing costs and constrained homeownership pathways—continue to push renters toward multifamily housing. Still, Colliers cautions that lagging job growth may challenge long-term demand.
Boston Proper Remains a Bright Spot
While the broader metro shows signs of cooling, the report highlights that Boston proper continues to demonstrate relative strength. Vacancy in the city decreased by 40 basis points year-over-year to 5.6%.
Performance varies widely by neighborhood:
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Back Bay/South End: lowest vacancy in the city at 2.6%
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South Boston/Seaport: 3.4%
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Allston/Brighton: highest vacancy at 10.8%, up 2.3 percentage points year-over-year
Allston/Brighton’s elevated vacancy reflects nearly 1,000 new units delivered this year, with major projects such as the 343-unit Verra and 265-unit Harper Apartments, which have created a short-term supply-demand imbalance. Without recent deliveries, vacancy in the submarket would stand at 5.2%.
Construction Activity Declines Sharply
New development is slowing as higher construction costs and tighter financing continue to impact the pipeline. Units under construction fell by 5.5% over the past year, to approximately 9,900 units.
The Inner Suburbs, previously one of the region’s construction hubs, saw pipeline activity fall by more than half year-over-year. While new deliveries have pushed submarket vacancy to 9.4%, existing product excluding recent completions remains relatively healthy at 5.2%. A slowdown in deliveries, Colliers notes, may give newly built communities more time to lease up.
Local Job Market Underperforms National Growth
Colliers describes Boston’s labor market as “tepid.” Although job gains improved relative to the past 18 months, the Boston metro’s 0.4% annual job growth trails the 0.9% U.S. rate and lags behind peer cities.
Sector performance is mixed:
Sectors with strongest job growth:
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Financial activities
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Leisure and hospitality
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Local and state government
Sectors showing weakness:
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Education and health services — representing more than 20% of the local workforce, now growing at its slowest pace in over two decades
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Professional and business services — accounting for 19% of jobs, but shrinking 0.8% year-over-year
Slower job growth poses a long-term demand risk for the multifamily sector, the report warns.
National Economic Uncertainty Looms
Colliers notes that national economic conditions are adding pressure. In an October 2025 speech, Federal Reserve Chair Jerome Powell acknowledged rising inflation expectations tied to tariffs and “rising downside risks to the labor market.”
The Fed lowered interest rates in September for the first time in a year and is expected to continue cutting rates in upcoming meetings. Meanwhile, economic forecasts point to the increasing probability of a recession, and consumer sentiment remains near historic lows.
“There is no risk-free path for policy as we navigate the tension between our employment and inflation goals,” Powell said.
Policy Changes Could Shape the Next Construction Cycle
Despite financial headwinds, zoning reforms may set the stage for future multifamily development:
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Boston recently approved rezoning allowing buildings up to 700 feet in designated parts of Downtown.
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Cambridge is considering zoning changes that would significantly increase residential density along Massachusetts Avenue and Cambridge Street. Earlier this year, the city allowed four-story residential buildings as-of-right citywide.
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The MBTA Communities Act continues to push municipalities to permit multifamily housing near transit; several towns must reach compliance by January 2026.
These policies could benefit developers in future cycles once capital markets stabilize.
A Market in Transition
Colliers’ Q3 analysis paints a picture of a market balancing strong underlying demand with rising vacancies, slower rent growth, and economic headwinds. Boston proper remains comparatively resilient, but regional softness and a cooling job market signal challenges ahead.
With construction slowing and zoning reforms underway, the next phase of Boston’s multifamily market may depend heavily on policy implementation, capital market conditions, and the region’s ability to reignite job growth heading into 2026.
