New report paints upbeat outlook for Boston’s economy despite concern for commercial property – The Boston Globe

“We see below [office] vacancy rates than in many parts of the country, increasing foot traffic, our public safety numbers are simply unmatched by any other city,” Wu said at a news conference on the report Monday. “We know that providing excellent city services for clean, safe, beautiful streets, walkable communities, access to health care, and all that we sometimes take for granted in our city of extraordinary, it actually puts us on a different footing than many other countries.â€

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 levels always like to take credit for good economic news, when it’s really the private sector, business and commerce that produces it,” Rooney said. “It’s our hospitals, it’s our colleges and universities, it’s our financial services industry, life sciences and biotech and technology companies that employ all these people and create this economic activity. … [The economy] it is recovering, but we have to make sure it continues to recover.â€

According to the report, Boston added more than 10,000 jobs last year, and the number of employees now exceeds those from 2019. Average consumer spending in 2023 was about 96 percent of 2019 levels, but represented a slight decline from 2022. Although foot traffic overall in 2023 reached 94 percent of what was seen in 2019, specific neighborhoods, including the downtown area, the South Boston Waterfront and the Back Bay, remain about 15 percent below 2019 levels.

Officials at Monday’s briefing highlighted tourism as a key driver of the city’s economic recovery, citing increased passenger numbers at Logan Airport and rising hotel occupancy rates.

The report also acknowledged the impact of the pandemic-induced transition to remote working and its impact on the city centre.

Boston’s office vacancy rate reached 12 percent at the end of 2023, up from 5.3 percent during that time period in 2019, the BPDA report said, citing data from real estate analytics firm CoStar. Some local brokers put the figure even higher: Colliers research cited a 17 percent vacancy rate for Boston offices in the fourth quarter of last year, while Newmark reported a 20.1 percent vacancy rate. for offices in the central business district during that time.

However, officials noted that high commercial building vacancy rates are a nationwide problem. Downtown Boston’s first-quarter vacancy rate of 16.6 percent — as reported by global brokerage firm CBRE — is the fourth lowest on a list of 26 major U.S. cities, including San Francisco, Denver , Chicago, Los Angeles. , Philadelphia and Houston, officials said.

Rooney said that while different reports can produce different numbers depending on when the snapshot is taken and what qualifiers are taken into account, in general, business executives he hears from say Boston’s office vacancy rate is very higher than 16 percent.

“The operating mindset of the business community is an office vacancy rate in the low 20s,” Rooney said.

Segun Idowu, the city’s chief of Economic Opportunity and Inclusion, noted the city’s efforts to mitigate the problem. They include a pilot program to encourage developers to convert commercial buildings into apartments, opening a city office to promote the nightlife economy and creating SPACE grant program to help small business owners set up shop in vacant storefronts.

“While it is a very urgent issue for the city to address, we know we are better positioned to help address the problem than some of our partners and cities across the country,” Idowu said.

Whether these efforts are enough to slow or reverse the trend remains to be seen. Business, real estate and development groups have been sounding the alarm for months about a possible continued decline in commercial property values, as several downtown office buildings recently sold for far less than they were worth. before the pandemic.

Property taxes make up about three-quarters of the city’s annual budget. Because Massachusetts communities are legally required to have a balanced budget, a significant drop in commercial property values ​​can mean a corresponding increase in residential property taxes to make up the difference.

The city already uses a split tax rate to reduce the tax burden on homeowners and taxes commercial properties at the maximum rate allowed by law. But Wu is seeking City Council and State House approval to temporarily raise that ceiling on commercial real estate in order to ease the transition to higher residential property taxes over five years if commercial values ​​continue to decline.

Business and real estate groups have rallied against the measure, which they argue will exacerbate the problem of sinking commercial property values., and further undermine the economic vitality of the downtown area.

“One of the major factors in business location decisions is state and city tax policy,” Rooney said. “The question is, are the policies we are considering to enable the good news produced in this report to be leveraged and expansion and growth to continue? Or are they creating a situation in which they can prevent further economic growth on the contrary?”.

But Wu, Idowu and other city leaders again defended the move Monday as necessary to temporarily keep housing costs relatively stable for renters and homeowners, which they said would also benefit businesses.

“I keep hearing that businesses are having a hard time recruiting and retaining employees because of housing costs, and so anything that would cause an immediate shock would only make the situation worse,” Wu said.

Niki Griswold can be reached at niki.griswold@globe.com. Follow him @nikigriswold.