KS Partners & Boston Pinnacle Lead Office-to-housing Applications Using Boston's New Tax Breaks

In just two months since its launch, the Boston Planning and Development Agency's (BPDA) initiative to encourage housing development through a special tax break has gained significant traction. Four applications have been submitted for office-to-residential conversions, with two located downtown and two in the West End. The program offers a property-tax abatement averaging 75% over 29 years, aiming to repurpose empty office spaces and invigorate downtown Boston post-Covid.

Major Projects Underway in Downtown Boston

Leading the pack is a proposal by Kambiz Shahbazi of KS Partners, aiming to transform three interconnected office buildings into 98 residential units at 85 Devonshire St. and 258 and 262 Washington St. Another downtown application comes from Adam Burns of Boston Pinnacle Properties, proposing the conversion of 281 Franklin St. into 15 units. These projects showcase the diversity of the program's impact, fostering housing development across different areas of the city.

West End Embraces Residential Transformation

Equity Residential, a Chicago-based real estate investment trust, has submitted applications for two West End complexes. Seeking to convert the commercial base of residential towers into homes, the projects at 2 & 5 Longfellow Place and 1 & 10 Emerson Place could add 57 units to Boston's housing inventory. While these properties lie outside the BPDA's targeted area, the agency remains open to considering projects in various parts of the city.

Challenges and Considerations for Developers

Despite the program's allure, potential hurdles loom for developers. The tax break, contingent on having a full building permit by October 2025, necessitates overcoming challenges such as high construction costs and financing constraints. Landlords and developers must navigate these obstacles to ensure the successful transformation of office spaces into residential units, with the BPDA actively supporting the conversion initiative.

Assessing Pros and Cons of the Tax Break

While the tax break holds substantial savings for property owners in the long term, some remain cautious. Developers, like Apisit Limlomwongse, who recently acquired 129 Tremont St., consider factors such as a 2% future sale proceeds requirement. As Mayor Michelle Wu's proposal for a 2% transfer fee awaits legislative approval, property owners weigh the potential benefits against the associated costs and uncertainties before committing to the program.