Writer: Eleana Teran
3 min read October 2023 — Boston is grappling with a rapidly evolving urban economy that is transforming real estate, transit systems and workplaces.
As highlighted in a recent report by the Massachusetts Taxpayers Foundation (MTF), cities like Boston which drive regional economies and operate some of the largest public transit systems, have been tasked with revitalizing their Downtown. As more time has shifted from physical to virtual offices, the urban landscape will need to adapt to maintain its lively reputation for entertainment.
A decrease in overall activity Downtown has been closely monitored over the past few years. According to CBRE’s Downtown Boston Office Figures for 2Q23, the Boston office market experienced negative absorption of 498,164 square feet, mainly in the Back Bay and Seaport areas. The vacancy rate reached 14.2%, the highest level in the last two decades. Office occupancy has decreased since 2019 and as more leases expire, the city may face further rising vacancies, which could have ripple effects on other industry sectors and city and regional finances.
Transit ridership, foot traffic and office occupancy rates have been sluggish coming out of the pandemic as well. In Boston, the path to recovery requires a commitment to ensuring that Massachusetts remains a center for talent and innovation. Invest:, met with industry leaders who emphasized adaptation, resilience and innovation as essential tools for revitalizing the city.
Ed Fleischmann, CEO and managing director, Edenred USA
What we’re seeing with clients around the country is that they are settling for two to three days in the office and one to two days remotely. A study that showed mobile device activity Downtown is at 52% compared to pre-pandemic. This can impact the culture of companies and the opportunities to interact. There’s also a negative impact on the restaurants and shops Downtown that rely on foot traffic and are struggling because of the lower commuter traffic.
The city is looking at new ways to bring people back. The hybrid model makes the transit situation a bit more complex because there isn’t as much of a reliance on transit. We are trying to facilitate as much as possible by giving employees rideshare and bike share programs and providing options for them to get into work. New York City has adopted a tap-and-go mobile transit pass that can be used at any time for any trip and that is an idea that would be ideal in Boston. The transit industry still needs to adapt to the speed of technology to make its services more accessible and efficient for riders.
Our company recently acquired 100% of the capital of Reward Gateway, a leading platform in employee engagement, with a strong presence in the United States. Reward Gateway offers a suite of modules ranging from employee discount offers and rewards and recognition solutions to wellness solutions.
Alice Benson, CEO, Benson Executive Search
While there are exceptions, the Boston economy primarily revolves around early-stage companies, with educational institutions, healthcare and a few major corporations being the exceptions. We launch companies. We are truly the biotech capital of the world and we continue to build organizations rapidly in the tech, fintech and AI sectors. These industries rely on brainpower, including scientists developing groundbreaking drugs and engineers creating game-changing AI and software. As a result, Boston experiences lower unemployment compared to the national average, leading to fierce talent competition. With the shift towards remote work, companies have the opportunity to hire from anywhere. However, the challenge lies in attracting and retaining talent, compounded by the local high cost of living driven primarily by housing expenses.
At the core of the challenges in our area is housing, as well as the need for improved transportation. Our public transit system has been neglected and is not as effective as it should be due to aging infrastructure. Despite these issues, our region remains attractive to young professionals and the younger generation, who seek career mobility. While we can’t change the weather, our active mayor and governor are focused on addressing housing and transportation concerns for the long term.
Jon Frey, Partner, Chief Operating Officer, Berkshire Residential Investment
Relative to other markets, we believe that Boston has a lot going for it. Job growth has been strong at 4% year-over-year as of May 2023, which compares favorably to the rest of the country. Rent growth and occupancy are in the Top 10 nationally based on Axios and Boston is not dealing with supply issues which should benefit future operating fundamentals. There is reason to believe that with the diversity of the economy and the multitude of demand drivers in Boston, there will continue to be good household formation, especially in the suburbs and urban edge, as more people are working from home and not commuting downtown in our hybrid work environment. Millennials are also coming of age and looking to have kids and move to the ‘burbs. That said, there will be intriguing opportunities in the Downtown market as we advance through this cycle. Our properties in the Boston region are over 95% occupied and we are looking to add to our exposure here over the next few years.
Kate Dineen, President & CEO, A Better City
We have been advocating for increased safety and service levels on the MBTA, which is in many ways the economic driver of our region. The system is facing serious safety, service and staffing issues and is not meeting our current or future needs. It’s crucial we provide the tools and resources to address these issues. Mayor Wu remains a strong advocate for public transit, understanding Greater Boston’s need for a reliable system.
The I-90 Allston Multimodal Project is evolving rapidly. This project aims to rejuvenate the Western Gateway by removing an old viaduct, enhancing Charles River access and promoting pedestrian areas. A key feature will be the new West Station stop on the Framingham/Worcester Commuter Rail Line, bolstering regional economic prospects and development at Beacon Park Yard.
With support from our partners, we’ve renewed the Greenway Business Improvement District (BID) for the Rose Kennedy Greenway. Lastly, we’re developing strategies to make our region more resilient to climate-related risks like flooding and extreme heat.
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