Together, the buildings span 2.6 million square feet — more than two Millennium Towers’ worth of office space — and have an assessed value of more than $586 million. (As government properties, the buildings are exempt from paying property taxes to the city of Boston.) Should they hit the market, they’d be among the largest office buildings sold here since the onset of the COVID-19 pandemic.
The opportunity to develop a huge amount of prime property in downtown Boston is likely to be of intense interest to the city’s real estate development world. But there’s no guarantee that the PBRB would recommend the three properties for sale yet. It’s still considering potential cost savings of consolidating offices, along with the expected cost of deferred maintenance.
But Dan Mathews, a PBRB board member and former commissioner of the public buildings service at the General Services Administration, said at Wednesday’s meeting that he felt the buildings could fetch a strong price.
“In this market, the value proposition is very, very strong, and I think there’s a path forward to actually implement it,” he said. “There, frankly, couldn’t be a better time to be securing long-term leases in the private market.”
Much like the private office market — where vacancy rates downtown are at multidecade highs — federal office buildings here are far emptier than they used to be, with employees who do go into the office filling between a quarter and half the space, Mathews said. And maintaining all that little-used office space comes at a cost; an analysis by real estate firm JLL showed that the cost of keeping the buildings open during low- or high-attendance periods ranges from $36,664 to $309,212 per employee.
Meanwhile much of the federal government’s 180 million-square-foot property portfolio needs extensive repair, and is riddled with expensive problems such as antiquated air systems, leaking roofs, unusable elevators, and flooding basements, the board said. Buildings managed by the GSA are on average more than 50 years old.
“Congress cannot appropriate its way out of this maintenance backlog,” said Nick Rahall, a former congressman from West Virginia and PBRB board member. “The inventory needs to be shrunk so tax dollars can be invested in properties where employees are actually coming to work.”
Earlier this year, the Office of Management and Budget approved PBRB’s recommendation to sell the eight-story Captain John Foster Williams Coast Guard Building on Atlantic Avenue facing Boston Harbor. If OMB approves the PBRB’s recommendations, it’s then up to the federal agencies in the buildings and the GSA to move tenants and sell properties before any redevelopment can begin.
For all the buildings it studies, the JFK, O’Neill, and McCormack buildings, the board said Wednesday it would consider a number of different disposal options, including an outright sale, a joint venture, or a ground lease.
But downtown Boston real estate prices have come a long way down since their pre-COVID peaks — a fact that didn’t escape Michael Capuano, a former congressman whom President Joe Biden tapped to be on the PBRB in 2022.
“That’s part of the discussion,” he said. “We can sell the building, but if we only get $1 for it, is it worth selling at that point?”
Capuano said the likelihood of the federal government selling all three of the buildings “is probably not very high,” adding that, “if we did, that would have an impact on the local market.”
Since the pandemic, many downtown Boston office buildings have been selling at steep discounts. After a $1 billion refinancing in 2022, the 36-story One Lincoln tower sold at auction for $400 million in March; 99 High St. this spring sold for 17 percent less than its prior owner paid for the tower two decades prior.
The JFK building at 15 New Sudbury St. spans 1 million square feet on 4.5 acres adjoining City Hall Plaza and finished construction in 1966. It has twin 26-story towers and an attached four-story low-rise portion, and is on National Register of Historic Places.
Also on the National Register is the McCormack building, a freestanding granite-clad building with three towers in a U shape — a 22-story recessed tower and two other 17-story towers, oriented toward Post Office Square. The McCormack building in particular “lends itself very well to residential” development, Mathews said.
And the Tip O’Neill Federal Building, an 810,407-square-foot pink granite office of 11 and 5 stories, dates to 1985 and is on the same block as the multibillion-dollar The Hub on Causeway mixed-use project above North Station.
Beyond the three major downtown federal buildings, the PBRB is also considering recommending the sale of a warehouse and parking lot at 11 Channel St. near the Seaport’s eastern edge South Boston, along with the Philip J. Philbin Federal Office Building in Fitchburg and the US Customs and Border Protection office in New Bedford.
The PBRB has until December 2026 to make a recommendation, but Mathews said the recommendations would ideally come sooner than that.
Catherine Carlock can be reached at [email protected]. Follow her @bycathcarlock.
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