Multifamily Case Study: Austin (The Domain) vs. Boston (Kendall Square)

Case Study Exercise, Multifamily, H2 Fall 2026

MIT CRE 11.S967 Commercial Real Estate Investment Strategy

Two 150-Unit Class A New Construction Apartment Buildings

Assignment

Analyze and compare two new-construction 150-unit Class A apartment buildings, one in The Domain (Austin, TX) and one in East Cambridge / Kendall Square (Cambridge, MA), each offered at its guidance price. You are a core-plus investor purchasing 1/1/2027 with 100% equity and a five-year hold, selling 12/31/2031 at your exit cap rate applied to Year-6 NOI.

Assume the two buildings are physically identical: four stories, 150 units (120,000 rentable SF, 800 SF average unit), with garage parking on the first two levels. Each carries the standard Class A amenity package for new construction in its area: elevator service, in-unit laundry, central air conditioning, a pool, an amenity center and work-from-home space.

Variables you control

• Starting market rent, from the comp set
• Market rent growth for Years 2 to 4 and thereafter
• Concessions (months of free rent) by year
• Exit cap rate

Use the interactive model at the bottom of this page to calculate the returns for the two properties based on your chosen variables. Use the results to inform your selection. Subjective risk and upside potential outside the investment projections can also be factored in.

Part I: How the U.S. Became Housing-Constrained

Multifamily rental units comprise roughly a quarter of U.S. housing inventory, with single-family homes making up about 70%. Demand for apartments is inseparable from the broader housing market.

The Great Financial Crisis (GFC) Inflection Point

Before the Great Financial Crisis the U.S. produced roughly 1.8 million housing units a year. From 2009 (roughly the beginning of the post-GFC recovery) through 2016 net additions to the housing stock ran far below that pace while population kept growing. Housing started to experience a deficit around 2010/2011 as reflected below. Net additions recovered to about 1.5 million units in 2025, roughly matching new demand but failing to close the accumulated housing deficit.

The ratio of added people to added housing units hovered around 1.5–2.0 before the GFC, then spiked to 5.0 new residents per added housing unit by 2010–11 (one new home for every five new people).

The estimates of the current U.S. housing shortage below range from 1.2 million to roughly 8 million units, a spread that reflects fundamentally different definitions of “balanced.” See Quantifying the Structural U.S. Housing Shortage for the full methodology behind each estimate.

Organization	Shortage Estimate (M units)	Year
J.P. Morgan	1.2	2025
CBRE Investment Mgmt	~2.0	2025
Realtor.com	2.5	2024
Moody’s Analytics	2.8	2024
Goldman Sachs (midpoint)	3.5	2025
Freddie Mac	3.7	2024
Zillow Research	4.7	2025
NAR	5.5	2021
McKinsey	~8.0	2024

The median first-time homebuyer was 30 years old in 2008; by 2025 the median first-time buyer was 40, and first-time buyers’ share of purchases fell to a historic-low 21%. The mean age at first childbirth traced the same path, rising from 25.0 (2007) to a record 27.6 (2024).

Renting is currently significantly cheaper than buying. The total monthly cost of owning the median home (approximate mortgage payment plus taxes, insurance, and upkeep)[1] peaked at 2.2× the median rent in 2023 and still sits at roughly 2.1× in 2025, near the highest premium since 2000. The wave of new apartment supply (below) held rent growth near inflation while home prices ran far ahead, resulting in a structural incentive to keep renting.

1. Owner’s monthly cost is approximated as median home price × (mortgage rate + 2%) ÷ 12, an amortization proxy, plus a 2% annual carry for taxes, insurance and upkeep. See Home Affordability for the full methodology.

The Multifamily Boom and the Cliff Behind It

Developers responded to post-pandemic rent growth with the largest apartment construction wave in modern history: a record ~696,000 units delivered in 2024. But deliveries are yesterday’s starts, and starts have collapsed: from a peak of ~733,000 units in 2022 to an annualized ~283,000 in H1 2026, down 61% from peak, the lowest level since the early 2010s.

Part II: Divergence, Austin vs. Boston

Austin and Boston are similar in the ways that matter to apartment demand: large student populations and strong technology, healthcare and research employment. Both cities have great demand bases but differ greatly when considering ease and cost of new construction, as reflected in the supply boom in Austin vs. very moderate new construction in Boston.

Austin remains the fastest-growing large metro in America: +14.8% from April 2020 through mid-2025 (to 2.62M), still adding over 2% a year. Boston grew +1.8% over the same five years (to 5.03M), modest but positive while peer gateway metros shrank.

Growth rates say how fast each metro is adding people; the age structure says who they are. Austin’s pyramid carries a pronounced 25 to 39 bulge, the prime renter cohort, at 26% of the population in 2024 against 22% in Boston, while Boston carries the heavier 55-plus block (31% versus 22%). The two pyramids below share one time slider: drag it to watch Austin’s bulge arrive over the last two decades, or switch to the state or county pair.

▶ Explore Population Pyramids Side by Side: Austin vs. Boston, Texas vs. Massachusetts, 1969–2024

Compare

Austin MSA vs. Boston MSA Texas vs. Massachusetts Travis County vs. Middlesex County

Notes

Source. NCI SEER U.S. County Population Data, 1969–2024 release (February 2026), Katrina/Rita-adjusted, 20 age groups, produced under interagency agreement with the U.S. Census Bureau and aggregated from county records. The same file, bands, encoding and statistics feed the state pyramids on U.S. Demographics, so the two tools read against each other. Population is measured as of 1 July each year. Summed across all counties, the 2024 U.S. total of 340,110,988 reproduces the Census Bureau national figure exactly.

Geographies. Austin MSA is the Austin-Round Rock-San Marcos metropolitan statistical area: Travis, Williamson, Hays, Bastrop and Caldwell counties. Boston MSA is Boston-Cambridge-Newton: Suffolk, Middlesex, Norfolk, Plymouth and Essex counties in Massachusetts plus Rockingham and Strafford counties in New Hampshire. Travis County contains The Domain; Middlesex County contains Kendall Square. Texas and Massachusetts use the same state series as the U.S. Demographics page. Each pyramid is scaled to its own population so the two shapes can be compared directly; the total population appears in the statistics beneath each chart. Current MSA definitions are applied to every year, so the series describe a fixed territory rather than the boundaries in force at the time. SEER resolves no lower than the county, so city-level pyramids are not available from this source.

Bands and statistics. Eighteen five-year bands, 0–4 through 80–84 plus 85 and over; SEER’s 90-and-over group is folded into the top band. Because 15 and 65 fall on band boundaries the dependency ratios are exact; median age is interpolated within the five-year band containing the midpoint. Generation boundaries follow Pew Research Center definitions and match the national and state charts.

Austin developers met pandemic-era rent growth with a torrent: deliveries peaked at ~32,000 units in 2024, more than four times Boston’s ~7,500. Boston’s constrained pipeline barely moved. Both markets have now pulled back hard: Austin started just ~3,200 units in H1 2026 (versus ~31,000 in full-year 2022).

The supply divergence set the rent paths. Austin asking rents are down ~10% from their 2022 peak ($1,736 → $1,562); Boston rents ground steadily higher to $3,016. The Boston premium over Austin, 56% in 2021, has widened to 93%.

Austin vacancy peaked at 15.8% at the end of 2024 and has ground down to 12.2% by mid-2026 on record absorption: trailing-twelve-month absorption of ~20,800 units against only ~12,700 delivered. Boston sits at 5.7%, about where it always sits. The debate: how fast does Austin’s recovery run, and what is that recovery worth relative to Boston’s certainty?

Part III: The Submarkets

	Vacancy	Asking Rent	Under Constr % of Inventory
MSA level (Q2 2026)
Austin MSA	12.2%	$1,562 / unit	4.4%
Boston MSA	5.7%	$3,016 / unit	5.0%
Submarket level
North Austin	14.5%	$1.78 / SF	1.5%
East Cambridge	5.2%	$5.19 / SF	6.7%
Micromarket level
The Domain	4.7%	$2.46 / SF	0%
Kendall Square	6.3%	$5.32 / SF	16.8%

Source: CoStar, data through Q2 2026. Full history on the Compare tabs of the companion workbook.

The Domain / North Burnet (Austin)

Austin’s “second downtown” has already worked through its glut: micromarket vacancy is down to ~4.7%, below Kendall’s, with zero units under construction and asking rents growing again (+2.8% YoY) while the surrounding North Austin submarket still digests 14.5% vacancy. The bear case: recovery at the Domain is already partly priced, the submarket around it is still soft, and a 608-unit project (Domain South End) is slated for 2028.

East Cambridge / Kendall Square (Boston)

The strongest rent block in one of America’s most supply-constrained metros: $5.32/SF asking, ~6% vacancy, anchored by MIT and the biotech cluster. Two wrinkles: Kendall’s office/lab market, the employment engine behind those rents, is carrying roughly 17% total availability in the current downturn, and the micromarket has a real pipeline: ~16.8% of inventory under construction, including a 439-unit delivery in 2027, the subject’s lease-up year.

Condensed; full comp exports (unit mixes, concessions, sale history) in the companion workbook. Senior-living and pre-2000 outliers omitted.

▶ Austin: all 25 multifamily submarkets

Metro totals: Inventory Units 342,698 · Under Constr Units 13,987 · 12 Mo Absorp Units 21,417 · Vacancy Rate 11.6% · Market Asking Rent/Unit $1,563 · Market Sale Price/Unit $220K · Market Cap Rate 5.7%

Submarket	Inventory	12 Mo Deliv.	Under Constr	UC % Inv	12 Mo Absorp.	Vacancy	Ask Rent/Unit	Rent Growth	Cap Rate
North Austin	32,248	467	720	2.2%	915	12.7%	$1,417	-2.4%	5.8%
Northwest Austin	35,113	0	1,026	2.9%	896	8.6%	$1,351	-2.5%	6.0%
East Austin	19,502	780	2,473	12.7%	1,142	11.6%	$1,827	-0.2%	5.5%
Downtown Austin	9,616	1,349	352	3.7%	1,024	13.0%	$3,807	1.9%	5.2%
Pflugerville	24,269	566	316	1.3%	1,595	10.5%	$1,410	-1.4%	5.7%
Northeast Austin	20,391	2,368	1,896	9.3%	2,809	16.0%	$1,404	-3.4%	5.7%
South Austin	21,982	544	612	2.8%	984	10.7%	$1,446	0.0%	5.7%
Round Rock	21,955	310	0	0.0%	1,024	8.8%	$1,482	1.0%	5.7%
Midtown Austin	17,936	905	791	4.4%	901	13.5%	$1,598	-0.7%	5.7%
Southeast Austin	16,706	1,225	1,037	6.2%	1,788	17.2%	$1,397	-3.3%	5.6%
Georgetown-Leander	17,699	426	574	3.2%	1,738	10.2%	$1,555	0.5%	5.6%
Riverside	19,003	396	0	0.0%	904	9.6%	$1,401	-1.2%	5.8%
Southwest Austin	14,294	744	669	4.7%	574	10.3%	$1,755	-0.1%	5.5%
South Central Austin	13,629	85	572	4.2%	558	7.9%	$1,826	2.2%	5.6%
Cedar Park	16,165	459	0	0.0%	1,027	9.4%	$1,462	0.1%	5.7%
Buda-Kyle	11,355	594	998	8.8%	646	12.0%	$1,445	-3.6%	6.1%
San Marcos	11,220	671	1,466	13.1%	985	17.5%	$1,270	-3.5%	6.4%
Far North Austin	4,340	446	175	4.0%	805	21.7%	$1,544	-0.7%	5.6%
Lake Travis	4,072	322	0	0.0%	301	6.8%	$1,883	2.2%	5.3%
Central Austin	3,934	38	0	0.0%	15	9.0%	$1,660	2.2%	5.9%
Bastrop County	2,201	250	310	14.1%	432	15.8%	$1,452	0.3%	6.2%
West Austin	2,351	168	0	0.0%	63	10.1%	$2,015	0.3%	5.7%
Hill Country	1,756	293	0	0.0%	238	23.7%	$1,654	-3.4%	5.6%
Caldwell County	812	0	0	0.0%	62	24.3%	$1,330	-0.2%	6.4%
Far West Austin	149	0	0	0.0%	-5	8.8%	$1,539	-8.4%	6.6%

Source: CoStar, data through Q2 2026. – = not reported by CoStar.

▶ Boston: all 31 multifamily submarkets

Metro totals: Inventory Units 304,853 · Under Constr Units 13,836 · 12 Mo Absorp Units 8,603 · Vacancy Rate 5.6% · Market Asking Rent/Unit $3,009 · Market Sale Price/Unit $456K · Market Cap Rate 5.2%

Submarket	Inventory	12 Mo Deliv.	Under Constr	UC % Inv	12 Mo Absorp.	Vacancy	Ask Rent/Unit	Rent Growth	Cap Rate
Allston/Brighton	12,698	300	834	6.6%	563	5.8%	$3,041	-0.2%	4.8%
Downtown Boston	12,291	0	156	1.3%	53	3.0%	$4,248	4.4%	4.8%
Fenway/Mission Hill	11,966	0	432	3.6%	257	2.7%	$3,717	2.0%	4.8%
Back Bay/South End	11,238	0	68	0.6%	46	2.6%	$4,324	5.1%	4.7%
South Boston/Seaport	7,174	19	1,059	14.8%	32	3.4%	$4,697	5.9%	4.7%
Route 1 North	15,330	683	24	0.2%	855	7.7%	$2,631	0.9%	5.3%
Everett/Malden/Medford/Melrose	14,357	151	798	5.6%	612	9.6%	$2,889	2.5%	5.2%
Harvard MIT	10,972	50	439	4.0%	98	4.6%	$3,978	3.8%	5.0%
Brookline/Newton/Watertown	11,833	40	458	3.9%	74	7.1%	$3,599	3.5%	5.1%
Somerville/Charlestown	7,720	636	2,996	38.8%	734	3.4%	$3,512	3.9%	4.8%
Metro West	15,311	453	460	3.0%	454	6.2%	$2,810	0.8%	5.2%
Roxbury/Dorchester	9,092	223	342	3.8%	154	9.7%	$2,900	0.3%	5.1%
Quincy/Milton/Randolph	13,872	288	686	4.9%	230	5.2%	$2,707	0.7%	5.2%
North Shore	15,524	119	72	0.5%	408	3.5%	$2,597	1.8%	5.5%
South Shore	12,195	297	208	1.7%	233	5.6%	$2,760	1.4%	5.1%
East Boston/Chelsea	7,646	419	596	7.8%	199	10.4%	$2,960	2.7%	5.0%
JP/Roslindale/West Roxbury	7,704	366	165	2.1%	172	6.7%	$2,715	2.6%	5.1%
93 North	9,714	246	138	1.4%	572	4.9%	$2,882	1.8%	4.9%
Waltham/Arlington/Belmont	9,796	68	112	1.1%	261	4.2%	$3,071	2.2%	5.4%
Route 1 South	10,042	449	178	1.8%	301	6.8%	$2,769	0.5%	5.1%
South Plymouth County	10,791	373	123	1.1%	199	5.8%	$2,500	0.2%	5.6%
Burlington/Woburn	7,356	72	0	0.0%	363	5.7%	$2,994	2.4%	5.3%
Lawrence/Haverhill	11,138	0	394	3.5%	208	4.3%	$2,243	1.7%	5.9%
Chelmsford/Tyngsborough/Townsend	6,017	0	1,309	21.8%	191	6.4%	$2,669	0.7%	5.2%
Alewife	5,545	16	0	0.0%	80	4.5%	$3,496	4.0%	5.1%
Route 2	5,268	286	312	5.9%	143	5.9%	$2,907	0.7%	5.0%
Suburban Rockingham County	7,845	843	70	0.9%	473	10.8%	$2,252	1.0%	5.6%
495-South	5,691	0	330	5.8%	96	4.1%	$2,521	0.1%	5.2%
Lowell/Dracut	7,830	77	37	0.5%	42	4.3%	$2,091	-0.2%	6.0%
Strafford County	6,918	364	276	4.0%	415	4.1%	$2,130	2.1%	6.1%
New Hampshire Beaches	3,973	111	764	19.2%	83	3.4%	$2,505	2.8%	5.4%

Source: CoStar, data through Q2 2026. – = not reported by CoStar.

Locked assumptions: 150 units · 120,000 rentable SF · 800 SF average unit · Operating margin 50% of effective gross rent* · sale at end of Year 5 (12/31/2031) valued at Year-6 NOI ÷ exit cap · no debt, no transaction costs.
*Operating margin covers all operating expenses, real estate taxes, management, insurance and vacancy. Deliberately simplified for class. The same 50% margin is applied to both markets for simplicity; in reality, properties in Boston typically operate at a higher margin, since operating costs do not scale with rent; high-rent markets keep more of each rent dollar as NOI. Effective rent = market rent × (1 − months free ÷ 12); concessions represent economic softness, separate from physical vacancy inside the margin.
Comp references (CoStar, Q2 2026): Domain-area Class A ~$2.40 asking PSF (2020+ vintage $2.26–$3.28), concessions ≈ 1 month; Kendall Class A ~$5.50 asking PSF, concessions ≈ 0.5 month. Market caps: Austin 5.7%, Boston 5.2%. Source: CoStar 08.30–31.2026; basis: MITCRE Fall 2025 case study, recalibrated.