Pictured at the New England Women in Real Estate luncheon last week in Boston are: (from left) Karen K. Hanlon, NEWIRE steering committee member; Charles E. Smith Residential Regional Vice President Stephanie S. Wasser; NEWIRE President Frances Allou Gershwin; and Thomas Meagher, president of Northeast Apartment Advisors.

Ominous clouds are assembling over one of the few bright spots in commercial real estate, but the multifamily sector has “weathered the storm” to date, industry expert Thomas Meagher told an audience at the Swissotel in Boston last Tuesday.

Rents are down and concessions up for apartment developments locally and nationally, Meagher said in his presentation at the New England Women in Real Estate luncheon. Nonetheless, the president of Northeast Apartment Advisors also maintained that multifamily has fared surprisingly well considering the extended economic demise, with the Hub performing significantly better than overbuilt regions such as Atlanta.

Even as the Massachusetts economy braces for its eighth straight quarter of contraction, “the Greater Boston area is doing extraordinarily well in the stability of the multifamily market,” said Meagher. “It is very healthy on the whole.”

Meagher was joined at the luncheon by Stephanie S. Wasser, regional vice president with Charles E. Smith Residential, who outlined a pair of luxury apartment projects the real estate investment trust is pursuing in Boston and Cambridge. If fully built out, the proposals would yield more than 1,100 units over the next four years.

NEWIRE opted to focus on multifamily because “it affects everyone,” steering committee member Karen K. Hanlon said in opening the event, calling the industry “essential to understanding our future and the future of our communities.” The topic certainly could not have been more timely, with the program held one day before the Boston City Council quashed Mayor Thomas Menino’s controversial rent control legislation before an emotionally charged audience at Boston City Hall.

Meagher briefly addressed the rent control debate, acknowledging that many multifamily developers have indicated the measure would chill their interest in the Hub. That could be problematic, he added, given that the major state and federal housing production programs of past decades are all but dead. “I’m concerned that without the subsidy programs, if we have rent control, we would end up with no units,” Meagher said.

At present, he said, the supply pipeline of new apartments in the Bay State is as strong as it has ever been, with Meagher’s firm tracking 212 projects in various stages of planning. If fully built out, it would yield 48,500 units for metropolitan Boston, with peak deliveries anticipated for 2005 and 2006.

‘Moving Mountains’

Although it is a sizeable number of units, Meagher said he is not fearful that the proposals will create a glut of apartments in the area, with the Massachusetts inventory significantly tighter than other markets. If they were all built out, the 48,500 units would only represent about 5 percent of the current supply of 875,000 units, Meagher noted, adding it is likely a number of proposals will never get off the drawing board. “It takes moving mountains to get multifamily permitted in this area,” he said.

The barriers to entry for apartments has kept investment interest in Greater Boston multifamily especially solid, said Meagher, who foresees 2002 as the busiest year yet for that arena. Bolstered by the $500 million sale this summer of the Flatley Co.’s massive apartment portfolio, Massachusetts should see as much as $800 million in multifamily transactions by year’s end, Meagher estimated.

In releasing details of NAA’s recent survey of 75,000 professionally managed apartments in Greater Boston, Meagher revealed sporadic results throughout the area, with Interstate 495 West apartments suffering greatly from the demise of the high-tech region. Average effective monthly rents there are down $60 to $1,226 since NAA’s March survey, while occupancy has dipped from 95.3 percent to 92.8 percent. Conversely, Route 128 West has seen occupancy and rents rise since March, with the monthly average of $1,725 up $101 per month and occupancy now at 97.2 percent, compared to 96.2 percent in March.

Meagher said he is not surprised by the results, citing job growth as the key element in determining how apartments will fare. Interstate 495 West has been battered by the recession, he noted. “Whether or not there is good occupancy depends on the economy,” he said.

Whatever the challenges, Charles E. Smith is committed to developing its luxury product in urban Boston, Wasser said during her presentation. That resolve is evident with Boston’s Liberty Place, a 419-unit apartment building to be built on a complicated infill site that used to house the heart of Boston’s adult entertainment district.

Not only will it be a chore to develop the 28-story building in one of the Hub’s most congested business districts, Charles E. Smith and local partner Kevin Fitzgerald have endured months of community meetings and legal challenges, all the time communicating their plans both in English and Chinese, given the project’s location on the edge of the city’s Chinatown district.

Virginia-based Charles E. Smith’s ability to wade through the process was partly due to its experience in such complicated urban projects nationally, said Wasser, but also because of its belief in the project and strategy of holding onto assets. “When you focus long-term, you are definitely committed to the quality of your buildings,” said Wasser, who predicted Liberty Place will help transform the once-seedy district into a safe and inviting neighborhood.

Similarly, Charles E. Smith hopes to improve a graffiti-strewn industrial wasteland in East Cambridge into another residential enclave with its three-phase, 700-unit apartment project near the Lechmere MBTA stop. After signing a purchase-and-sale agreement in 1999, Charles E. Smith encountered a building moratorium enacted by residents fearful of overdevelopment in that neighborhood. While that did delay the project somewhat, Wasser explained the Charles E. Smith took advantage of the situation by working with city officials and residents to craft a building envelope all parties could live with.

The Cambridge endeavor, which could be under construction next year, is garnering special attention from Charles E. Smith, said Wasser. “This project gives us the opportunity to develop our reputation locally,” she said, adding, “It’s very important to listen and respond and show that you share the goals of the community.”

Working with architect ADD Inc. of Cambridge, Charles E. Smith hopes to create a new residential destination for the city, Wasser said, building on the previous construction of the Museum Towers apartments and the long-awaited development of a new park nearby as part of the Big Dig project. The initial 22-story building will be followed by smaller structures of 15 and nine stories, while Charles E. Smith is also planning extensive landscaping that will even incorporate the Lechmere overhead trestle.