Q4 2025 Newsletter
Boston demonstrated notable resilience in Q3 2025 despite the ongoing challenges of elevated borrowing costs and national macroeconomic uncertainty. The Federal Reserve maintained its “higher for longer” rate stance, signaling caution on inflation and keeping capital costs elevated across both residential and commercial lending markets. While transaction activity has slowed compared with the ultra-low-rate years of the early 2020s, Boston continues to attract investment interest thanks to its enduring fundamentals: a globally recognized higher education system, a diversified innovation economy, and severe structural limits on new supply that ultimately support long-term rent growth.
Policy shifts shaped the local market this quarter. On August 1, Massachusetts implemented its new broker-fee law, eliminating the requirement that tenants shoulder thousands of dollars in upfront leasing costs. While the change lowers entry barriers for renters, many landlords and brokers note that the costs will be rebalanced elsewhere in the system, most likely through rents. Over time, this may sustain or even strengthen landlords’ ability to preserve income streams, particularly in a market where vacancy remains structurally low. It will be important to monitor how this policy impacts market pricing into Q4 2025, and I will analyze the results in the next newsletter, as early expectations suggest rental prices could increase in line with the shift in transaction costs. Meanwhile, the MBTA Communities Act continues to influence long-term planning, requiring municipalities to expand zoning for multifamily housing near transit nodes—a potential boost to supply, but one that will take years to fully materialize.
Development momentum also provided a counterweight to broader uncertainty. Dedham unveiled plans for a $500 million lab and housing campus spanning 1.5 million square feet, underscoring the continued draw of Greater Boston for large-scale investment. East Boston’s Day Square advanced with a 170-unit residential complex that will expand the city’s much-needed rental supply, while the South Station tower and new bus terminal approached delivery. In South Boston, the redevelopment of the Edison site pivoted toward a housingfocused buildout that could bring more than 600 new units to market as early as 2026.
Commercial performance remained uneven, though signs of stabilization emerged. Trophy office assets in Boston’s core locations continue to attract competitive bidding and hold rents steady, while commodity buildings trade at discounts but are beginning to find their pricing floor. Industrial rents remain near record highs after years of growth, though the pace has moderated as new construction delivers. In life sciences, vacancy has risen to historically high levels, yet premier clusters like Kendall Square remain tight, reinforcing their long-term positioning. Retail, by contrast, stands out as one of the tightest markets nationally, with vacancy near historic lows and strong retention among tenants. Multifamily continues to be one of the most landlord-favorable sectors: demand has consistently outpaced supply, occupancy is near record highs, and rent growth remains among the strongest of any U.S. metro (CBRE, 2025).
For property owners and long-term investors, the broader picture is clear: Boston retains a rare combination of supply constraints, institutional strength, and global appeal. Compared with peer metros such as New York, San Francisco, and Miami, Boston continues to offer a compelling blend of price stability, liquidity, and income durability. With fundamentals supported by higher education, healthcare, and a globally competitive innovation ecosystem, Boston real estate remains a defensive, income-rich allocation even as the national market adjusts to a higher-rate environment.
Executive Summary
Back Bay remains one of Boston’s most enduringly attractive submarkets, combining historic architecture, luxury residential demand, flagship retail, and powerful institutional anchors. Even in an environment of higher borrowing costs and more cautious investment sentiment, the neighborhood has demonstrated resilience across both residential and commercial segments.
The condominium market continues to favor buyers, though recent data suggests conditions are beginning to stabilize. According to MLS data as of September 4, 2025, active listings totaled 139 units, slightly higher than 131 last year and well above the levels recorded in 2021 and 2022. The absorption rate stood at 18.8 percent, compared with 19.3 percent in 2024 but stronger than the 15.6 percent recorded in Q2, while months of supply came in at 5.3, up from 5.19 a year ago but tighter than the 6.4 months seen in the spring. This pattern suggests that while inventory remains elevated, demand has picked up modestly, giving the market a firmer footing than earlier in the year(MLS, 2025).
Pricing has re-based from 2023 peaks but shows early signs of stabilization. In Q2 2025, the median list price fell sharply to $2.25 million, more than $700,000 below the prior year. By Q3, the median list price had stabilized at $2.27 million, though this remains $226,500 lower than Q3 2024. Price per square foot averaged $1,487 in Q3 versus $1,641 a year ago. Year-to-date, the median sale price stands at $1.45 million compared with $1.545 million in 2024, and the sale-to-list ratio is 97.9 percent versus citywide figures above 99 percent, highlighting the persistence of a buyer’s discount (MLS, 2025).
Transaction velocity reflects a cautious but functioning market. Year-to-date pending totaled 222 units, essentially flat versus 226 in 2024 but down from 255 in 2023. Closed sales reached 213, up slightly from 207 last year. Median days to offer tightened to 20 from 21 in 2024, while median days on market extended to 35 from 33. Quarterly pending sales, however, were softer, with 46 units going under agreement in Q3 compared with 71 last year, reflecting a more deliberate pace of buyer decision-making (MLS, 2025).
Seller behavior continues to create opportunity for well-capitalized buyers. Back Bay has logged 121 pricechange listings year-to-date versus 90 in 2024. The median sale-to-original-list ratio of 96.9 percent trails the citywide average of 98.5 percent, signaling greater flexibility here than across Boston overall (MLS, 2025). While citywide inventory rose to 1,165 units from 953 last year and prices have edged higher, Back Bay remains a submarket where leverage favors buyers (MLS, 2025).
Newbury Street underscores the neighborhood’s commercial strength. Asking rents remain in the $100 to $125 per square foot range, supported by global luxury brands, digitally native retailers, and established local boutiques (CBRE, 2025). Availability has dropped from 7.8 percent in 2022 to 3.4 percent in 2025, well below the national average of 4.9 percent (CoStar, 2025). Across Greater Boston, retail availability has hovered near 3 percent for more than a year, limited by few move-outs and a thin construction pipeline. Annual leasing volume sits just above 3.0 million square feet, down from 3.7 million in 2016, reflecting scarce supply rather than weak demand (CoStar, 2025).
Scarcity is most acute in small-format retail. Only 2.5 percent of Boston’s space under 25,000 square feet is available, and nearly half is in lower-rated properties. For specialty and luxury retailers, this creates a structural barrier to entry and enhances the prestige of Newbury Street. Opportunities to purchase retail condominiums or mixed-use assets are extremely limited, as most properties remain tightly held. Seasonal events such as “Open Newbury Street” draw tens of thousands of visitors, while everyday foot traffic is among the city’s highest (Boston Planning & Development Agency, 2025). For brands, presence on Newbury Street equates to visibility and status, while for landlords and investors, constrained supply underpins rent stability even as national markets show volatility.
Taken together, residential adjustment, retail scarcity, and institutional clustering reinforce Back Bay’s position as one of Boston’s most competitive investment environments. For investors, conditions today offer a rare blend: elevated residential inventory with pricing concessions and buyer leverage, alongside a retail corridor where leasing space is scarce and ownership opportunities rarer still. With MLS data showing discounts and CoStar data confirming availability at historic lows, Back Bay’s Golden Corridor remains a benchmark for both opportunity and constraint in Boston real estate.
Back Bay Spotlight
U-Haul’s Data Tracking Boston’s Inbound Migration
Migration trends highlight another key driver of demand. UHaul data shows that Boston continues to attract significant inflows of households from other states and metros, with New York, New Hampshire, Connecticut, Pennsylvania, Rhode Island, New Jersey, Florida, Virginia, Maine, and North Carolina among the leading origin states (U-Haul, 2025). At the metro level, the strongest connections outside Massachusetts come from New York City, Providence, Washington, D.C., Manchester, and New Haven (Boston.com, 2025). Within the Commonwealth, Worcester, Taunton, Hyannis, Fall River, and Northborough consistently send households into the Boston market (U-Haul, 2025).
The migration story is multifaceted. While New York dominates, reflecting both affordability pressures in Manhattan and Brooklyn and Boston’s strength in healthcare and biotech employment, other inflows are tied to lifestyle and academic linkages. Providence and Manchester offer lower living costs but lack Boston’s job scale, funneling professionals north. New Haven’s universities continue to send graduates into Boston’s economy, while Washington, D.C. flows are linked to graduate studies, consulting, and government-affiliated work. Within Massachusetts, Worcester’s university ecosystem produces talent that often transitions into Boston for career growth, while smaller flows from Taunton, Hyannis, Fall River, and Northborough reflect the pull of the metro’s employment base.
Boston’s higher education system is central to this dynamic. The city and Cambridge together host more than 50 colleges and universities, with a combined enrollment of over 250,000 students each year. Institutions such as Harvard, MIT, Boston University, Northeastern, and Boston College, draw heavily from out-of-state market, and many students remain post-grad, reinforcing rental and ownership demand.
For investors, the implication is clear. Regional inflows, national connections to New York and Washington, instate relocations, and the steady pipeline of students transitioning into the workforce converge to create durable housing demand. Rental markets in Fenway, Allston, Back Bay, Mission Hill, and Cambridge/Somerville remain tight, while ownership demand has preserved capital values even amid broader pricing adjustments. U-Haul’s migration data may be anecdotal, but the directional story is consistent: Boston continues to attract households from across the region and beyond, sustaining its long-term housing demand and reinforcing its role as one of the most resilient markets in the United States.
The Consumer Price Index (CPI) for rent of primary residence in the Boston–Cambridge–Newton metro has risen steadily since 2020, climbing from about 370 to nearly 475 by July 2025 (1982–84=100)—a 29 percent increase over five years (Bureau of Labor Statistics, 2025). This index reflects inflationary pressure in the rental market rather than absolute rent levels. The sharpest gains came between mid-2022 and late-2023, when supply shortages and post-pandemic demand drove the fastest rent increases in decades. Growth has eased since early 2024 but remains above headline CPI and wage growth.
For investors, sustained rental inflation highlights the resilience of income-producing assets in Boston, while affordability pressures may spur policy changes, tenant turnover, and long-term demand for new supply. Nationally, Q3 2025 has been more subdued: GDP growth slowed to 1.6 percent year over year, down from 2.5 percent in 2024, while consumer spending eased to 1.9 percent from 3.1 percent (Bureau of Economic Analysis, 2025). Inflation moderated to 2.6 percent, yet the Federal Reserve has held rates at 5.25–5.50 percent, keeping mortgage costs elevated and deal activity down nearly 20 percent year over year (Federal Reserve; MSCI Real Assets, 2025).
Boston continues to outperform. Unemployment in the metro was 3.0 percent in July versus 4.2 percent nationally, with 42,000 jobs added year to date, led by healthcare, higher education, and professional services (Bureau of Labor Statistics, 2025). Venture capital investment reached $5.7 billion in the first half of 2025, concentrated in biotech, fintech, and digital innovation, while international student enrollment rose 6 percent from fall 2023,reinforcing rental demand (PitchBook; IIE, 2025).
Not all sectors are equally positioned. Life sciences are correcting after rapid expansion, with lab vacancy reaching 29.8 percent in Q3, or about 17 million square feet available (Axios Boston, 2025). Net absorption turned negative as tenant growth slowed and firms consolidated. Long-term prospects remain supported by $3.2 billion in NIH funding in 2024 and Boston’s concentration of research institutions and pharmaceutical partners (NIH, 2025).
Overall, while higher capital costs and slower national demand weigh on real estate, Boston demonstrates relative resilience through low unemployment, diversified industries, and its global pull as a center for education, healthcare, and innovation.
Rental Inflation & Economic Backdrop
The Federal Reserve kept its policy rate unchanged through the summer, maintaining a “higher-for-longer” stance to ensure inflation is fully contained. While national inflation has shown signs of easing, borrowing costs remain elevated, shaping pricing expectations, transaction activity, and investor underwriting across Boston’s residential and commercial markets (Federal Reserve, 2025).
In the residential sector, financing remains restrictive. As of September 4, 2025, the national average 30-year fixed mortgage rate was about 6.57 percent, with 15-year loans at roughly 5.73 percent (Bankrate, 2025). Massachusetts borrowers face even higher costs, with 30-year conforming rates averaging around 7.00 percent and 15-year rates near 6.00 percent (Bankrate, 2025). These conditions continue to strain affordability, reduce the pool of leveraged buyers, and sustain a significant share of cash transactions, particularly in Boston’s luxury segment.
Commercial lending has tightened in parallel. Local and regional banks, which provide critical financing for midsized development projects in Greater Boston, are now demanding lower loan-to-value ratios and stricter debt service coverage, according to the Federal Reserve’s Senior Loan Officer Opinion Survey (Federal Reserve, 2025). Institutional and life insurance lenders remain active but highly selective, directing capital primarily toward stabilized multifamily and modern industrial properties. Office assets, by contrast, remain difficult to finance.
Overall, borrowing costs remain structurally high, forcing investors to adapt. Cap rates are recalibrating upward, hold periods are lengthening, and leverage is being scaled back. For well-capitalized buyers, these conditions present an opening: lighter competition and more favorable pricing. For highly leveraged investors, however, debt costs remain a significant barrier, delaying acquisitions and keeping many on the sidelines until either monetary policy shifts or further market repricing improves affordability.
Interest Rates & Lending Environment
Market Performance
Boston’s housing market showed resilience in Q3 2025, though affordability remained a major headwind as borrowing costs stayed high. MLS data shows the citywide median sale price as of September 4, 2025 was $770,000, up modestly from $755,000 at the same time in 2024. Price per square foot averaged $800, nearly unchanged from $802 a year earlier, underscoring that prices have largely stabilized after the volatility of 2022 and 2023. Zillow’s August snapshot was consistent with this, reporting an average home value of about $779,000, a year-over-year gain of less than one percent (MLS, 2025; Zillow, 2025).
The rental market softened at the margins. MLS data shows Q3 2025 rental listing inventory reached 2,080 units, compared with 1,706 a year earlier. Median asking rents held steady at $3,300, while median days on market lengthened to 63 from 33. The absorption rate declined to 34.7 percent from 44.6 percent in Q3 2024, and months of supply rose to 2.9 from 2.2. This indicates that while tenants now have more options and leasing is taking longer, landlords have maintained pricing power. Zillow’s August estimate of $3,339 for Boston’s median rent aligns closely with MLS data. Axios reported that a household now needs an income of about $127,000 to afford this level of rent without exceeding the 30 percent affordability threshold, which is more than 25 percent higher than five years ago (MLS, 2025; Zillow, 2025; Axios, 2025).
Commercial office performance remains uneven. Downtown vacancy stayed above 15 percent in Q3 as hybrid work patterns and a glut of commodity office space weighed on leasing. At the same time, Class A trophy properties in prime locations with modern amenities continue to see stable rents and competitive bidding from institutional capital. CBRE’s midyear review indicated that recent trades of commodity buildings suggest values are finding a floor, while well-leased assets are again financeable, a sign of returning confidence (CBRE, 2025). Industrial real estate, which includes logistics, distribution, warehousing, and light manufacturing, has begun to cool after a surge in demand during the pandemic years. MLS data reflects slower absorption compared to 2021 and 2022, though investor appetite remains intact. A notable example this quarter was CRG’s groundbreaking of a 660,000 square foot logistics facility in Greater Boston, demonstrating continued long-term demand for modern, efficient space tied to the region’s airport, port, and highway corridors (Real CRG, 2025).
Life sciences remain the most closely watched sector. Vacancy across Greater Boston’s lab and research market approached 30 percent in Q3, totaling about 17 million square feet of space. This reflects the wave of speculative construction launched during the 2020 to 2022 boom, coupled with tenant consolidation. Even so, Kendall Square continues to stand out, with vacancy below 10 percent and demand anchored by the strongest research institutions and venture-backed companies (Axios Boston, 2025; CBRE, 2025).
Broader investment trends are also shifting. Cap rates in Boston have moved upward in response to financing costs, with multifamily averaging in the mid-four percent range, prime office near six percent, and industrial close to five percent (CBRE, 2025). Nationally, CoStar reported in August that U.S. commercial real estate prices rose for the first time in five months, led by high-dollar trades in major metros. Its Composite Index climbed 1.3 percent in July, and year-over-year losses narrowed to just 1.1 percent. The improvement was driven by institutional investors such as REITs, pension funds, and large investment managers reentering the market, a sign that capital flows into the sector may be stabilizing after more than two years of repricing (CoStar, 2025).
Development activity highlighted the continued scale of capital investment in Greater Boston. Dedham advanced plans for a $500 million mixed-use campus combining lab and residential space. In East Boston, Redgate progressed a $43 million, 170-unit project in Day Square slated for completion in 2026. Allston saw a proposal for a seven-story, 96-room hotel at 393 Cambridge Street. In Jamaica Plain, the long-anticipated Blessed Sacrament conversion advanced with 55 affordable apartments and a 200-seat cultural space (Axios Boston, 2025).
In the core, South Station Tower neared completion, with more than 680,000 square feet of office space and 166 condominiums. The adjacent South Station bus terminal is scheduled to open in 2025 with 13 new berths and direct concourse access (Boston.com, 2025). South Boston’s former Edison power plant shifted to a housing-led plan with more than 600 units possible, with construction projected to begin in 2026 (Axios Boston, 2025).
Infrastructure projects remained active. The $160 million Sumner Tunnel restoration entered final phases, Logan Airport pressed forward with over $2 billion in terminal and airfield upgrades scheduled through 2027, and the MBTA continued resiliency work on the Red-Blue Connector and Green Line upgrades (MassDOT, 2025; Massport, 2025; MBTA Advisory Board, 2025).
In sum, MLS data confirms that Boston in Q3 2025 experienced rising inventory, longer leasing timelines, and slower absorption, yet prices held steady in both the for-sale and rental markets. Segment-specific adjustments in office, industrial, and life sciences mirror national trends, where CoStar’s indices suggest commercial property pricing has begun to stabilize after a multi-year decline. Together, these signals point to a Boston market that remains structurally undersupplied in housing and resilient across core asset classes, even as elevated rates test deal velocity.
Closing Remarks
As we look back on the third quarter of 2025, Boston continues to distinguish itself as a resilient market set apart by its economic fundamentals, institutional strength, and global reach. While national real estate activity has slowed under the weight of elevated interest rates and tighter credit conditions, Boston has benefited from its diversified base of healthcare, higher education, professional services, and technology. This foundation has supported stronger employment, healthier rental demand, and deeper pools of capital than many peer markets. At the same time, the city is not without challenges. The correction in the life sciences sector underscores the cyclical nature of even Boston’s strongest industries, and affordability pressures in the housing market remain acute as rental inflation continues to outpace wage growth. These factors, combined with macroeconomic headwinds, remind us that local strengths do not insulate the region entirely from national and global cycles.
For investors, the key takeaway is balance. Boston remains a supply-constrained, knowledge-driven city where long-term demand drivers are unlikely to diminish. Yet today’s environment demands disciplined underwriting, conservative leverage, and careful attention to sector-specific trends. Multifamily and well-located mixed-use assets continue to demonstrate durable performance, while the office and lab markets require a more selective approach.
As always, our perspective is long term. Boston’s limited land availability, global academic and research networks, and continued infrastructure investment position it to outperform through cycles. Near-term volatility should be viewed in the context of the city’s long track record of delivering steady income and capital appreciation overtime.
Thank you for reading and for your continued interest in Boston real estate. I welcome any questions or conversations about how these trends may align with your investment strategy.