A burst of apartment construction is sweeping across Boston’s neighborhoods, as several developers are starting towering projects to tap into high demand for rental units while the homeownership market continues to struggle.
In the last few weeks, three builders have started work on complexes that combined will bring more than 850 new apartments to the city over the next couple of years. On Monday, a fourth builder will announce plans to build 295 apartments on a vacant parcel in Chinatown.
The rush of activity is fueled by climbing rents and dropping vacancy rates that make apartment buildings particularly attractive investments in the otherwise dour real estate market. In the quarter that ended Sept. 30, average asking rents in Boston climbed to $1,773, making the city the fourth most expensive rental market in the country, according to Reis Inc., a real estate research firm. Only New York City; Westchester, N.Y.; and Fairfield County, Conn., are more expensive.
Vacancy rates, meanwhile, dropped to 4.2 percent, from 5.5 percent in the same quarter in 2010, according to Reis.
The heightened demand for rentals goes beyond downtown Boston, with large new complexes also going up in Somerville, Cambridge, Cohasset, Weymouth, Andover, and other municipalities. Real estate specialists said the increasing supply will eventually help to moderate prices.
“If I’m a renter, I’m encouraged by this,’’ said Gregory Vasil, chief executive of the Greater Boston Real Estate Board. “It’s been a very long time since we’ve really produced a lot of apartments like this, and the increased supply will help address the problem’’ of ever-rising rents.
For developers, Boston has quickly moved up the list of the nation’s best places to build apartments. It is now ranked third on the Marcus & Millichap National Apartment Index list of the strongest rental markets, up from eighth a year ago.
Behind the trend is persistent weakness in the homeownership market, as the continued soft economy, flat housing values, tougher lending rules, and high number of foreclosures have combined to keep people from buying property. With the home-purchase market so slow, lenders are much more likely to finance apartment buildings rather than condominiums.
Almost every housing project proposed in Boston in the last six months has involved rental units. Just yesterday, the Kensington Investment Co. began construction of 381-unit building on Washington Street. Also moving forward is Avalon Exeter, a 187-unit tower in the Back Bay by AvalonBay Communities Inc., and The Victor, a planned apartment complex that will add 286 units to the northern edge of the Rose Fitzgerald Kennedy Greenway.