Report says Boston region teetering on ‘the precipice’

THE GOOD NEWS is the Boston area is hardly alone in facing serious headwinds from the pandemic’s upending of work patterns and the uncertainty it’s introduced about our economic future. The bad news: simply having plenty of company in our misery does not mean we can sit back and wait to ride some broad trend that will eventually pull us out of the hole we’re in. 

That’s the message from a report issued by the Massachusetts Taxpayers Foundation, “Urban Economies on the Precipice,” which paints a dire picture of the state of things in Boston and five other major US metropolitan areas.

Average office vacancy rates in major US cities hover around 50 percent (it stands at 30 to 35 percent in Boston). Transit ridership in the metro regions, home to the six largest public transit systems in the country, is down sharply. Downtown foot traffic is off by 30 to 40 percent in five of the cities and by a whopping 66 percent in Washington, DC. 

The driver of all the disruption: a shift to remote work that took hold when COVID hit, but has quickly become a permanent change in how white-collar workers do their jobs. The report says the rate is now “settling” at about 30 percent of work being done remotely. 

“This is not a Boston phenomenon,” said Doug Howgate, president of the Taxpayers Foundation. But how well the region fares under the new reality, he said, is very much under our control. The question now is “how Boston reacts to a global phenomenon,” said Howgate.

In many ways, the roadmap the report lays out for how the region should respond is the same one local leaders have advocated for years – but with added urgency now tacked on. 

“For us to meet the moment here and make sure the area thrives in this new world, we’ve got to get our act together in a few ways,” said Howgate. 

With the second highest rents in the country, the report says, the Boston area needs a much more muscular response to the need to build more housing to temper the run-up in housing costs. 

We’re also near the top when it comes to time lost to traffic congestion. Meanwhile, the report says a quarter of transit users in the Boston area spend more than two hours per day getting to and from work, a major inhibitor of efforts to get people to return to the office. All of that points to the urgent need to get the MBTA out of its death spiral and back to some semblance of a smooth functioning transit system 

Beyond attention to those fundamentals, the report says the region needs to double down on exploiting its advantages as a leading competitor in the innovation economy. It points to the big state-backed life sciences initiative as the sort of thing we need more of. 

Howgate said yesterday’s announcement that Cambridge was selected – following a full-court press by state officials, Rep. Richard Neal, and UMass president Marty Meehan – to be an “investor catalyst” hub for a new federal health research center is a great example of a win in that competition. 

Turning the usual slow-and-steady philosophy on its head, the report says fast adaptation is the only way to weather the changes and come out in good shape. “It’s a sprint, not a marathon,” it declares. 

Underscoring the need for fast response to changing conditions, the report suggests that the pandemic-driven disruption will soon be followed by another major convulsion, estimating that  artificial intelligence could replace as many as a quarter of US jobs. 

“Generative AI” will exert further “downward pressure on service jobs and demand for office space,” the report says. 

Research has already warned, before any impacts of AI, of an “urban doom loop” from dramatically reduced office occupancy rates. A reduction in commercial real estate values could pose significant “financial risk to banks and cities,” the report says.   

If you need to recognize there’s a major problem in order to tackle it, Howgate said he at least sees positive signs that state leaders understand the need to move aggressively on multiple fronts. 

Between things like the push to reauthorize the state life sciences initiative, a housing bond bill expected to land soon, and tax relief aimed at maintaining the state’s economic competitiveness, he said, “you’re beginning to see the outlines of a plan.”