A significant opportunity is emerging in downtown Boston as the Public Buildings Reform Board (PBRB) evaluates the potential sale of three major federal office buildings. Collectively, these buildings encompass approximately 2.6 million square feet of space, exceeding the total office space of two Millennium Towers, with an assessed value surpassing $586 million. As government-owned properties, they are exempt from property taxes, making any potential sale particularly appealing in the current real estate market.
Should these properties make it to market, they could represent some of the largest office building sales in Boston since the onset of the COVID-19 pandemic. The prospect of developing substantial prime real estate in the city’s core is likely to generate immense interest within the local real estate sector. However, the board has not yet confirmed whether it will recommend these properties for sale, as discussions continue regarding cost savings through office consolidations and the anticipated expenses associated with deferred maintenance.
During a recent meeting, PBRB board member Dan Mathews, who previously served as commissioner of the public buildings service at the General Services Administration, expressed optimism about the properties’ market potential. He noted, “In this market, the value proposition is very, very strong, and I think there’s a path forward to actually implement it. There, frankly, couldn’t be a better time to be securing long-term leases in the private market.”
The current landscape mirrors challenges faced in the private office sector, where downtown vacancy rates have reached multidecade highs. Mathews pointed out that federal office buildings are also less occupied than in the past, with the number of employees utilizing the space ranging from a quarter to half of the total capacity. Maintaining underutilized office spaces incurs significant costs, as highlighted by a JLL analysis illustrating that expenses to keep these buildings operational, regardless of attendance, can range from $36,664 to $309,212 per employee.
Amid these challenges, it’s worth noting that a substantial portion of the federal government’s 180 million-square-foot property portfolio is in desperate need of repairs. Many buildings, typically over 50 years old, suffer from costly issues, including outdated air systems, leaking roofs, nonfunctional elevators, and flooding basements.
Nick Rahall, a former West Virginia congressman and another PBRB board member, emphasized the urgency of addressing the maintenance backlog. He stated, “Congress cannot appropriate its way out of this maintenance backlog. The inventory needs to be shrunk so tax dollars can be invested in properties where employees are actually coming to work.”
Earlier in the year, the Office of Management and Budget (OMB) approved the PBRB’s proposal to sell the Captain John Foster Williams Coast Guard Building located on Atlantic Avenue, which faces Boston Harbor. If the OMB endorses the PBRB’s future recommendations, the responsibility will shift to the federal agencies occupying the buildings alongside the GSA to relocate tenants and facilitate the sale process before redevelopment can commence.
For the JFK, O’Neill, and McCormack buildings under consideration, the board is examining various disposal options, including an outright sale, a joint venture, or a ground lease. However, Michael Capuano, a former congressman appointed to the PBRB by President Joe Biden in 2022, raised concerns regarding the property values. He cautioned that the substantial decline in Boston’s downtown real estate prices since the pandemic poses a challenge: “That’s part of the discussion. We can sell the building, but if we only get $1 for it, is it worth selling at that point?”
Capuano assessed that the likelihood of selling all three buildings is relatively low, noting, “If we did, that would have an impact on the local market.” Many downtown Boston office buildings have experienced significant price reductions post-pandemic. A prime example is the 36-story One Lincoln tower, which underwent a $1 billion refinancing in 2022 and later sold at auction for $400 million in March, marking a substantial discount. Additionally, the 99 High St. property sold this spring for 17 percent less than the price its previous owner paid two decades earlier.
Among the properties under review, the JFK building at 15 New Sudbury St. spans 1 million square feet across 4.5 acres adjacent to City Hall Plaza. Constructed in 1966, it includes twin 26-story towers and has been listed on the National Register of Historic Places. The McCormack building, another property on the National Register, features a distinct U-shaped design with three towers — a 22-story recessed tower flanked by two 17-story structures, all oriented toward Post Office Square. Mathews noted that the McCormack building is particularly well-suited for residential redevelopment.
Additionally, the Tip O’Neill Federal Building, an 810,407-square-foot pink granite structure completed in 1985, lies adjacent to the major mixed-use project The Hub on Causeway, part of North Station’s multibillion-dollar development. Beyond these three notable downtown buildings, the PBRB is also considering the sale of a warehouse and a parking lot at 11 Channel St. near the Seaport in South Boston, alongside the Philip J. Philbin Federal Office Building in Fitchburg and the U.S. Customs and Border Protection office in New Bedford.
The PBRB has until December 2026 to finalize its recommendations, although Mathews expressed hope that they could propose their findings sooner.
image source from：bostonglobe
