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By MAURA WEBBER SADOVI | SPECIAL TO THE WSJ
For historic preservationists in Boston, the recession has brought some temporary relief. They had gotten riled up after Boston Mayor Thomas M. Menino said he hoped to move City Hall to a new site on the south waterfront.
He predicted last year that the move could take place in about four years. But now, with the recession tightening its grip on the nation's economy, Mayor Menino says he is reconsidering that timing. "I think it's further off," he says.
Mayor Menino says he is rethinking whether to spend about $2 million for engineering studies on the potential new City Hall site. "I can't consciously move ahead on a major project like this at this time. I have to think about my schools, think about my parks, my public works," he says.
The current concrete City Hall was built in the 1960s. It is loved by some who admire its brutalist architectural style and mocked by others. Last month, it earned a top spot on a list of world's ugliest buildings on the travel Web site virtualtourist.com. In 2006, when the capital markets were awash in investors chasing real-estate deals, the mayor hoped to fetch as much as $300 million for the property, which enjoys a prime location across from historic Faneuil Hall on the edge of the financial district.
Boston's City Hall will stay in its current home, for now, as recession has led local officials to reconsider priorities.
But any property sale in Beantown and beyond is facing stiff headwinds these days. Deals are getting done but values are dropping, and the dollar volume of office sales priced at $5 million or more in Boston's central business district is expected to fall to about $870 million this year, from about $7 billion last year, according to Real Capital Analytics, a New York-based real-estate research firm. Even the city's iconic John Hancock Tower has yet to secure the joint-venture investor that its cash-strapped owners, New York-based Broadway Partners, are seeking.
The economy of the Boston region -- an area that is home to about 5.7 million people that benefits from a mix of employers that includes universities, health-care, technology and finance companies -- is under growing pressure. Unemployment rose to 4.6% in October from 3.6% in the year-earlier period, though it remains well below the nation's October unemployment rate of 6.1%, according to the Labor Department.
Boston's role as a financial hub is a particular risk for the downtown office market; a flurry of job-cut announcements have recently come from the likes of Boston-based State Street Corp. and other financial companies. Financial-services companies occupy about 42% of the estimated 51 million square feet of office space in the city's downtown submarkets, according to real-estate services firm Jones Lang LaSalle.
Boston's metrowide office and retail rents already are declining, and the apartment and warehouse rents are poised to decline over the next 12 months, according the Boston-based Property & Portfolio Research Inc., a real-estate research firm. Mayor Menino last week unveiled a $40 million loan program aimed at jump-starting development as a rising number of real-estate projects have stalled.
A new City Hall would provide an additional anchor to the South Boston waterfront. The formerly industrial area has enjoyed improved access thanks to the "Big Dig" roadway project and it has drawn development in recent years. The Institute of Contemporary Art museum has opened there, along with hotels and several office buildings and the city plans call for some 20 million square feet of additional development to be built there, according to Kairos Shen, Boston's chief planner.
The weakening economy has given new ammunition to critics of the south waterfront City Hall plan. Michael Flaherty, a Boston city councilor-at-large, says even in good economic times the city would do better focusing on improving existing infrastructure.
For his part, the mayor says he still believes moving City Hall to city-owned property on the waterfront makes sense over the long term. It would ensure the south waterfront doesn't become an enclave only for the rich, he says.
He maintains it would create more city revenue by selling the current City Hall property and putting it back on the tax rolls. Despite frozen credit markets, the mayor remains bullish that a sale of City Hall could easily fetch the $300 million or more.
"It's one of those landmark sites for the city," Mayor Menino says. "Even now the market would take it right away."
Write to Maura Webber Sadovi at maura.sadovi@wsj.com
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