“We look down [office] „We have higher vacancy rates than many other parts of the country, increased foot traffic, and our public safety numbers are unmatched by any other city,” Wu said at a press conference Monday. „We know that providing clean, safe, beautiful streets, walkable communities, access to health care and great city services, all of which we sometimes take for granted in our incredible city, really sets us apart. Fundamentally, from many other places.”
Jim Rooney, president and CEO of the Greater Boston Chamber of Commerce, said the good news in the report is a reflection of the strength of Boston’s economy, and officials should focus on how to continue that positive momentum.
„Governments at the municipal, state and federal level always want to take credit for good economic news, when really it’s the private sector and business and commerce that produces it,” Rooney said. „It’s our hospitals, it’s colleges and universities, it’s our financial services industry, life sciences and biotechnology and technology companies that employ all of these people and create this economic activity. … [The economy] It’s coming back, but we have to make sure it comes back again and again.”
According to the report, Boston added more than 10,000 jobs last year, and the number of employees is now higher than it was in 2019. Average consumer spending in 2023 was 96 percent of 2019 levels, but represented a slight decrease from 2022. However overall traffic congestion in 2023. Reaching 94 percent of what was seen in 2019, specific neighborhoods, including the downtown area, the South Boston waterfront and the Back Bay, are 15 percent below 2019 levels.
Officials at Monday’s conference emphasized tourism as a key driver of the city’s economic recovery, citing growing passenger numbers at Logan Airport and increasing hotel occupancy rates.
The report also acknowledged the impact of the shift to remote work affected by the pandemic and its impact on downtown.
Citing data from real estate analytics firm Costar, Boston’s office vacancy rate rose from 5.3 percent in 2019 to 12 percent by the end of 2023. Some local brokerages put that number even higher: Colliers Research cites a 17 percent vacancy rate for Boston offices In the fourth quarter of last year, Newmark reported a 20.1 percent vacancy rate in offices in the central business district during that time.
However, officials stressed that high commercial building vacancy rates are a nationwide problem. Downtown Boston’s first-quarter office vacancy rate of 16.6 percent — according to global brokerage CBRE — was the fourth-lowest among 26 major U.S. cities, including San Francisco, Denver, Chicago, Los Angeles, Philadelphia and Houston. Officials said.
Rooney said different reports can produce different figures depending on when the snapshot is taken in time and what qualifications are taken into account, and business leaders say that, in general, the office vacancy rate in Boston is higher than 16 percent.
„The operating mood of the business community is an office vacancy rate in the low 20s,” Rooney said.
Segun Idowu, the city’s head of economic opportunity and inclusion, pointed to the city’s efforts to mitigate the problem. A pilot program to encourage developers to convert commercial buildings into housing includes launching and creating a downtown office to promote the nightlife economy. The SPACE grant program helps small business owners set up shop in vacant storefronts.
„While this is a very urgent matter for the city to address, we know that we are in a better position to help solve the problem than our partners and some cities around the country,” Idove said.
It remains to be seen if those efforts are enough to slow or reverse the trend. Business, real estate and development groups have been warning for months that commercial property values could continue to decline, as some downtown office buildings have sold for far less than their pre-pandemic value.
About three-quarters of the city’s annual budget comes from property taxes. Because Massachusetts communities are legally required to have a balanced budget, a significant decrease in commercial property values can mean a tax increase on residential properties to make up the difference.
The city already uses a split tax rate to reduce the tax burden on homeowners, and it taxes commercial properties at the highest rate allowed by law. But Wu is seeking approval from the City Council and the State House to temporarily increase the cap on commercial real estate to ease the transition to higher residential property taxes in five years if business values continue to decline.
Business and real estate groups have rallied against the move, which they argue will worsen the problem of sinking commercial property values., and further harm the economic vitality of the urban area.
„One of the primary factors in business location decisions is state and city tax policy,” Rooney said. “The question is, do the policies we are considering help promote, expand and continue to grow the gospel developed in this statement? Or are they creating an environment that can inversely inhibit further economic growth?
But Wu, Idowu and other city leaders again supported the measure Monday, saying it should temporarily stabilize housing costs for renters and homeowners, which they said would also benefit businesses.
„I keep hearing that businesses are struggling to recruit and retain employees because of housing costs, so anything that causes an immediate shock will make things worse,” Wu said.
Niki Griswold can be reached at [email protected]. Follow her @NikkiGriswold.