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€

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.

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. 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.