What is bringing Boston investors into secondary markets north of the city? Value-add opportunities in the Merrimack Valley are attracting investors who have been priced out of the Boston area. Situated along the northeastern Massachusetts and southern New Hampshire borders, this region is experiencing economic growth and improving demographics in submarkets including Lowell, Lawrence and Haverhill.
“The Merrimack Valley is an example of a secondary market where investors can find both value-add Class-B assets prime for capital improvements,” explains Francis Saenz, Investment Associate for Northeast Private Client Group. “With competitive interest rates from lenders and economic development and job growth gaining momentum throughout the region, these investors will be well-positioned to maximize their returns in the years ahead.”
Job creation and economic development in the Merrimack Valley
Since 2016, more than $13.4 million has been invested in the Merrimack Valley through M2I2, the Massachusetts Manufacturing Innovation Initiative which is designed to spur both innovation and job creation. Further, the new budget approved by the Massachusetts House of Representatives in May includes more than $600,000 in funding to support economic development, education and health initiatives across the region.
Among the planned development projects is an approved 82-acre multi-use development in Salem – poised to house condos, retail, entertainment, restaurants and even a hotel – which is expected to be an economic driver for not just the town but also the Merrimack Valley region. Further, Boston-based athletic apparel company New Balance is moving forward with the development of an advanced manufacturing facility in Methuen focused on testing advanced manufacturing techniques, 3-D printing, and research and development opening up job opportunities. Plans are also underway for an Amazon distribution center, which would create 1,500 jobs, at Osgood Landing in North Andover.
Proximity to metropolitan areas
A significant component of the Merrimack Valley’s appeal is the easy commute to employment centers in Boston and Portsmouth, NH. Boston’s MBTA Commuter Rail also reached the area with stations in Ayer, Lowell, Lawrence and as far north as Newburyport. Demand for multifamily housing is particularly strong, in large part due to college students, recent graduates, and younger families outpriced by Boston’s highly competitive rental market.
For example, the Lowell multifamily market has enjoyed increasing popularity with investors this current cycle, with ample room for continued rent growth as generational properties come to market. Rent growth over the past 5+ years has been consistent with an 18.6% increase from 2014 to 2019 according to data provided by Apartment List. It is ranked 10th out of the 50 cities in Massachusetts for total number of businesses, with Lowell General Hospital, UMass Lowell, Kronos, and Verizon as the top employers. It is also home to a business incubator program at UMass Lowell, offering work and laboratory space along with office resources to startups in the area.
Recent NPCG transactions in the Merrimack Valley region include:
Sale Price: 1,450,000
Cap Rate: 7.13%
Sale Price: $1,327,500
Cap Rate: 8.94%
Sale Price: $785,000
Cap Rate: 8.57%
Sale Price: $615,000
Cap Rate: 7.94%
Northeast PCG is currently offering several multifamily and retails assets in the Merrimack Valley region. You can view our active listings here.