The Boston City Council has passed a resolution urging the Wu administration to create a Blue Ribbon Commission aimed at addressing the challenges posed by increasing office vacancies in the downtown area. This decision comes as a watchdog warns of an impending budget shortfall that could reach nearly $2 billion within the next five years.
The resolution, which is non-binding, passed this week with a unanimous vote of 12-0, though one councilor, Sharon Durkan, chose to vote present. This marks the second instance in which the Council has expressed support for establishing such a commission.
Introduced by Councilor Ed Flynn, the resolution seeks to form a commission that would include business leaders, city and state officials, neighborhood advocates, and other experts. The aim is to study the impacts of office vacancies, recommend strategies to mitigate them, and bolster city revenue while ensuring the economic vitality of Boston and its surrounding region.
During the Council meeting, Flynn highlighted that increased vacancy rates adversely impact real estate values, ultimately affecting the property tax revenue that the city relies on.
A report released last week by the Boston Policy Institute, in collaboration with the Center for State Policy Analysis at Tufts University, projected a stark increase in office vacancies and the corresponding financial repercussions. Flynn referenced this report, which suggests that office vacancies could contribute to a staggering $1.7 billion budget shortfall over the next five years.
This projected shortfall is driven by an anticipated decline in office values by approximately 35-45% within the same timeframe. In a previous report, BPI and Tufts had estimated a lower range of decline between 20-30%, predicting a budget shortfall between $1.2 and $1.5 billion. The most recent findings indicate that while a $1.4 billion budget shortfall is the best-case scenario, the actual figure could be as high as $2.1 billion.
Additionally, Flynn cited data from real estate firm Cushman & Wakefield, revealing that Boston’s office vacancy rate has climbed to 17%, a significant increase from the 15.1% recorded just a year prior.
The ramifications of these vacancies are evident in the office sales market. Flynn noted that several prominent buildings in downtown Boston have sold at substantial discounts over the past year. For instance, a building at 101 Arch St. was sold for $78 million, a sharp decrease from its original sale price of $121.7 million in 2005. Another property, One Lincoln St.—previously known as the State Street building and currently under HarborVest—was sold for $400 million at a foreclosure auction in March, a price that is less than half of its previous valuation.
Further, Flynn observed that 99 High St. was recently sold for $227 million, down from its purchase price of $273 million in 2005, despite its assessed value being $373.7 million.
The rising vacancies and subsequent declines in office values intensify the existing challenges within the city’s budgetary framework, which is heavily reliant on property tax revenues. Approximately three-quarters of Boston’s revenue comes from property taxes, with a third derived from commercial properties.
Commercial real estate executives in Boston have voiced their concerns about the future of office space and are seeking assistance from local, state, and federal officials to rejuvenate downtown by increasing foot traffic and attracting workers back into these spaces.
The resolution emphasizes the critical need to address office vacancies as part of a broader strategy to revitalize downtown Boston. Successfully filling these vacancies is essential for stabilizing the city’s tax base and budget.
Despite these concerns, Mayor Michelle Wu’s office did not provide a comment regarding the Council’s call for the establishment of a Blue Ribbon Commission. Recently, however, Wu adopted a more optimistic perspective on the downtown real estate market when questioned by reporters. She noted that the latest projections by the BPI regarding office vacancies seemed unfounded.
Wu pointed out that the prior year’s report from BPI had predicted a $1.5 billion revenue loss over five years, yet the city has experienced no revenue loss so far, asserting that Boston’s budget remains balanced.
In her remarks, Wu referred to BPI as a “shadowy organization” that seeks to undermine the progress the city is making. Her critique further intensified as she dismissed the previous year’s report as “false information.”
During a budget signing ceremony for the city’s fiscal year 2026 budget of $4.8 billion, Wu maintained that Boston is well-positioned to navigate current uncertainties, unlike many other cities. She did, however, acknowledge the potential economic impacts of federal funding cuts initiated by President Donald Trump in support of sanctuary cities, rather than the decline in commercial revenue driven by office vacancies.
Wu also mentioned her stalled tax shift legislation, which aims to alleviate the burden on residential taxpayers by redistributing a portion of the tax burden onto commercial properties. This initiative came as a response to the anticipated impacts of falling office values on the city’s budget. However, the state Senate killed this legislation late last year due to pushback from the commercial sector, marking a political setback for Wu after her long advocacy for its passage.
As of now, there has been no progress on her refiled tax bill since it passed the Council and was submitted to Beacon Hill for the third time in February.
With both the City Council advocating for proactive measures to address office vacancies and the Mayor expressing a potentially conflicting viewpoint, the near future of Boston’s downtown economy remains uncertain.
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