Boston’s Budget Still Stressed by Declining Office Building Values

Boston Mayor Michelle Wu and the Boston Policy Institute are attempting to address a challenging budget revenue issue for the city amid continually declining values for Boston's office buildings. 

Commonwealth Boston stated on Saturday, June 7, that Evan Horowitz, the Tufts University analyst and author of two reports on the city's budget crisis, claimed that Boston's revenue outlook “looks worse than we expected.” 

The city's $4.6 billion operating budget is heavily dependent on property taxes. Boston calculates these taxes based on assessed values of property and an applied tax rate. Commercial property taxes comprise one-third of the city's budget.

According to the Boston Policy Institute's latest report, property taxes have historically been “very stable” sources of revenue, allowing Boston to weather previous economic downturns. However, several of the city's prime office spaces, such as 101 Arch St. and 400 Atlantic Ave., are being sold at discounts of 50% to 70%. 

With hybrid and remote work, high mortgage rates, and federal tariffs contributing to increased facility costs, "there's no reason to expect a near-term turnaround in the value or profitability of office spaces," the report noted.

“The total assessed value of all office properties in Boston fell 9% in FY 2025 (in real terms), a one-year decline comparable only to the [2008] financial crisis and the bursting of the [2001] dot-com bubble. While those earlier, recession-induced drops were short-lived, today's slump seems more durable.”

The Boston Policy Institute's recent report, similar to the one it issued in 2024, hammered on what it called a city budget “shortfall” due to falling office building values. It stated that the new estimate totals $1.7 billion over the next five years.

The Commonwealth Beacon noted that the city has attempted to convert some downtown office space into residential properties to boost downtown traffic, boost the city's housing inventory, and maintain stable property values. 

"These office conversions face several challenges; the success of this program, however, will be felt over an extended time horizon," according to an S&P assessment on the matter.