New zoning could let big, new towers rise in downtown Boston in the future. But in the short term, will a tax increase on commercial buildings make things worse? iStock illustration

Can Boston escape the so-called urban doom loop?

Probably. But it’s going to take a lot more than rolling out new “skyline districts” where developers can build taller towers to bring back battered downtown Boston.

These new zoning districts, where developers could in theory go as high as 700 feet, are a last-minute addition to Boston Mayor Michelle Wu’s vision for helping inject new life into Boston’s increasingly troubled downtown, under the banner of the BPDA’s PLAN: Downtown rezoning initiative.

Like cities across the country, Boston has been hit with a tidal wave of office vacancies as remote and hybrid work has gone from cutting-edge trend to a permanent part of the American workplace.

Empty office space, in turn, has tanked the value of office buildings and towers in Boston and across the country. And that, in turn, is threatening to blast a hole in municipal bottom lines, with the Boston Policy Institute projecting a loss of half a billion in annual revenue by 2029.

Fewer office workers – as much as half of the city’s office space may be empty of workers now, even as three-fourths of downtown offices are still officially leased by various companies, according to CBRE – have left downtown pockmarked with empty storefronts and deserted restaurants.

The latest report from the Kastle Group, which tracks office occupancy rates across the country, has pegged it at just under 50 percent. And while Boston is not included in the cities Kastle surveys, given what’s happened to the city’s office market there is no reason to think things are somehow dramatically different here.

Boston’s Doom Loop Defenses

Where could all this be headed? Take a gander at St. Louis, where the “doom loop” is in full swing, landing the city on the front page of The Wall Street Journal last week.

The city’s largest office building, the 44-story AT&T Tower, is now empty and recently fetched just $3.5 million. Nearby, the 21-story Railway Exchange building, for a century a bustling commercial and office hub, is boarded up with steel plates to keep vandals and squatters out.

Here’s the Journal’s summary: “As offices sit empty, shops and restaurants close and abandoned buildings become voids that suck the life out of the streets around them. Locals often find boarded-up buildings depressing and empty sidewalks scary. So even fewer people commute downtown.”

Boston may very well avoid such a cataclysmic-like collapse of its downtown business district.

The Hub has built-in advantages, including its massive collection of colleges, universities, research facilities and internationally renowned hospitals.

That will provide the kind of safety net that many other cities, including St. Louis, just don’t have. But there’s a big gap between “less than a cataclysmic collapse” and “thriving.”

And as the crisis mounts, Boston Mayor Michelle Wu is refusing to deal with the painful reality that being stingy with owners of the city’s battered office buildings and towers could backfire badly.

Mayor’s Expensive Asks

Yes, Wu has been pushing office-to-residential conversions, but the program has been slow to get off the ground, with just a couple hundred units proposed so far. The city has insisted that 20 percent of units in these projects be set aside as money-losing affordable housing.

Sure, developers will get a break on their taxes, but the 20 percent mandate, which the Wu administration has been pushing for all projects, is an expensive ask on top of the hefty costs involved with transforming office buildings with completely different layouts into apartments.

Meanwhile, as office building values plunged, the mayor’s response has been to propose a temporary shift in the city’s tax burden onto commercial property that critics contend could make the situation even worse.

Wu is seeking a green light from the state legislature to make up for at least a portion of the potential loss in revenue from ailing office buildings by hiking tax rates on office buildings, among others, for several years.

While that would cushion what would otherwise be a very large residential tax increase that homeowners would have to absorb, it could push already troubled properties deeper into financial distress and even foreclosure.

Why Tax Rate Increase Bites

Yes, owners of struggling office buildings would pay less overall in taxes due to the plunge in value of their properties.

But their income from lease payments will likely have gone down even more.

Scott Van Voorhis

And at a time when they are struggling to pay their bills after taking a big revenue hit, building owners will need every dollar they can get in order to make ends meet.

The city’s epic building boom is grinding to a halt. Few, if any, new major projects are starting up as work wraps up on buildings and towers that have been under construction the past two or three years.

Skyline districts are all fine, but somewhat irrelevant right now when the combination of high interest rates, high construction costs and expensive city regulatory mandates has put new development into a deep freeze.

The most important thing the mayor can do right now is avoid making a bad situation worse.

Scott Van Voorhis is Banker & Tradesman’s columnist and publisher of the Contrarian Boston newsletter; opinions expressed are his own. He may be reached at sbvanvoorhis@hotmail.com.