Northmarq report finds improving employment, tighter apartment supply and stronger rents, while investment activity shifts toward smaller suburban properties
BOSTON— Greater Boston’s multifamily housing market strengthened in the second quarter of 2026, as improving employment, tighter vacancy and rising rents pointed to healthier market fundamentals, according to a new report from Northmarq.
The Q2 2026 Boston Multifamily Market Report found that employment in the Boston area grew year over year for the first time since 2024. The improvement coincided with stronger apartment demand, helping push vacancy lower and allowing rents to post their strongest quarterly increase since early 2023.
The metro-wide multifamily vacancy rate fell to 4.9% in the second quarter, a 20-basis-point improvement from the first quarter. Vacancy tightened across every major asset class, with Class B properties recording the largest improvement at 30 basis points.
Despite the quarterly improvement, vacancy remained 10 basis points above its level a year earlier.
Rents Post Strongest Quarterly Gain Since Early 2023
Rents also accelerated during the quarter.
Average asking rents increased 2.1% during the second quarter to $3,108 per month, according to Northmarq. On a year-over-year basis, rents were up 1.4%.
Some of Boston’s most expensive neighborhoods continued to see particularly strong rent growth. In the Back Bay/South End submarket, rents increased 4.6% from a year earlier to nearly $4,350 per month, significantly outpacing the broader metropolitan market.
Northmarq attributed the improvement in part to tenants absorbing apartments faster than developers were completing new units.
At the same time, the region’s development pipeline is thinning. Construction completions have slowed, while permitting activity has remained well below historical norms, setting the stage for less new supply entering the market.
The improvement, however, was not uniform across Greater Boston.
In Brookline, Newton and Watertown, ongoing construction combined with softer demand pushed vacancy higher, running counter to the broader metropolitan trend. The performance of those communities suggests that even land-constrained suburban markets can experience short-term pressure when significant new apartment supply comes online.
Multifamily Investment Activity Cools
While operating fundamentals improved, investment activity slowed during the second quarter following an unusually strong start to 2026.
Two of the year’s largest multifamily transactions—together totaling more than $350 million—closed during the first quarter and accounted for more than one-third of total first-half dollar volume.
Outside of those large transactions, deal sizes remained relatively consistent. Northmarq said first-quarter sales averaged approximately $23 million, compared with roughly $28 million in the second quarter.
The bigger change was in the type of properties attracting buyers.
Investors increasingly favored smaller, older apartment properties in suburban and outer-market locations, while there were no Class A multifamily transactions recorded during the second quarter.
That shift reflects growing investor interest in value-add opportunities, particularly as newer properties continue to command significantly tighter capitalization rates than older assets.
Despite the slowdown in transaction activity, the median multifamily sale price rose to $343,000 per unit in the second quarter.
Supply Constraints Could Support the Market
Looking ahead, Northmarq expects Boston’s multifamily operating fundamentals to continue improving during the second half of 2026, although the pace is likely to moderate from the gains recorded in the second quarter.
Employment is on track for its first annual increase since 2023, helped by recently announced expansions such as Boston Dynamics’ planned project in Waltham. Hiring, however, remains below the region’s longer-term trend.
On the supply side, development is expected to slow further. Two years of relatively modest permitting activity have left fewer projects positioned to begin construction, and full-year apartment completions are expected to fall substantially below historical averages.
That reduction in new supply could provide continued support for rents and occupancy, although Northmarq expects normal seasonal patterns to moderate some of the gains recorded during the second quarter.
The report also notes that one source of market uncertainty has diminished after Massachusetts’ highest court removed a proposed rent-control measure from the November ballot in June. Legislative efforts to advance rent stabilization, however, remain ongoing.
Suburban Markets and MetroWest in Focus
Northmarq expects Boston multifamily investment activity to remain below 2025 levels through the rest of 2026 unless another wave of large transactions emerges.
The firm expects the recent preference for smaller, older properties in outer submarkets to continue, with average capitalization rates likely to remain around current levels or move modestly higher.
MetroWest could be an area to watch. The corridor has already been the most active Boston-area submarket by deal count this year, and Boston Dynamics’ planned expansion in Waltham could generate additional investor interest in the area.
According to Northmarq, a pickup in permitting activity or the return of larger transactions would provide the clearest indications that investor confidence is broadening and that Boston’s multifamily investment market is moving toward a more sustained recovery.
Overall, the second-quarter data point to a Boston multifamily market that is gaining strength: employment is improving, vacancy is tightening, rents are rising and new supply is becoming more limited. The investment side of the market remains more cautious, however, with buyers increasingly targeting smaller, older and potentially value-add properties outside the urban core.
