Class B and C office properties across downtown Boston could prove too costly for the city to fund at a large scale. iStock illustration

Maybe hold off on those plans to rename the Financial District. 

Not long ago, Boston’s traditional center of business and commerce appeared poised for a glorious new future as the city’s newest residential neighborhood. 

The rise of remote work emptied out office towers across the Financial District and beyond, with older, less marketable buildings the hardest hit as the office market did its best to imitate real-life skyscraper implosions, like the one that leveled downtown’s Travelers Building in the late 1980s. 

With Greater Boston suffering from a dire shortage of housing, it didn’t take long for stories to appear in the local press about converting some of these older office addresses into badly needed new apartments and condominiums. 

Before long, it seemed like the Financial District would be sporting a new name, like the “Apartment Zone” or the “Condo District.” 

By early spring, Synergy, a major owner of some of the business district’s older office addresses has begun studying whether to convert some of its older and emptier buildings into condos or apartments. 

Matthew Godoff, executive vice president of Synergy, revealed at an industry event that it had hired Gensler, a consulting firm that specializes in residential conversions, to examine its portfolio, which includes 10 Post Office Square and 2 Oliver and 100 Franklin streets in the Financial District, 294 Washington St. in Downtown Crossing, and One Center Plaza, just across the street from City Hall. 

But since then, reality has begun to set in, with early hopes that large-scale conversions of empty offices could birth to a booming new residential neighborhood giving way to a more tentative, targeted approach that might see only a few buildings actually make the jump. 

City’s Potential Pilot Program 

For starters, Synergy’s local chief released a statement stressing the challenges of converting buildings designed for offices into rentals or condos. 

And he also made clear that some sort of government subsidy or incentive would be needed to make the conversion financially feasible. 

Now, as Banker & Tradesman’s Steve Adams reports, the Wu administration has started to talk to owners of older office buildings in the class B and C buildings about a potential pilot program under which the city would chip in cash to help get conversions off the ground. 

Sure, it’s a step forward when it comes to office-to-residential conversions in Boston. 

But it’s also a signal that remaking old office buildings into trendy new residential digs will be a potentially costly endeavor, requiring unknown levels of government incentives. 

It’s also money that city officials may find hard to part with in coming years as the values of a large number of Financial District office buildings sink, cutting into the stream of commercial tax revenue Boston heavily relies on to pay its bills. 

High Costs Drive Skepticism 

A new report out of the Brookings Institution also strikes a cautionary note as well. 

The report warns that office to residential conversions are “not a panacea,” but rather “one tool in a much broader toolkit for downtown revitalization.” 

Scott Van Voorhis

And when it comes to city and state governments helping foot the bill for these conversions, local officials need to move cautiously, with the debate over how much work will still be done in the office – and how much remotely – still not settled. 

“It is still early in the shift to hybrid work and many market forces (e.g., office buildings repricing to lower rents) have yet to play out,” Brookings scholars Tracy Hadden Loh and Egon Terplan write. “Governments rushing to provide financial support for conversions could inadvertently subsidize the wrong behavior.” 

And even if it makes sense, it could prove costly – maybe even prohibitively so – to do. 

A study of office-to-housing conversions in San Francisco pegged the per-unit cost at between $472,000 to $633,000 a unit, Brookings notes. 

Let’s just say that could add up rather quickly. 

Scott Van Voorhis is Banker & Tradesman’s columnist; opinions expressed are his own. He may be reached at sbvanvoorhis@hotmail.com.