Massive Office Building Project to Benefit Boston in Major Way

Since the real estate market came tumbling down in 2008, few cities have been able to look forward to the jobs, revenue, and revitalization that can accompany the development of a big new office property. Boston is the latest exception.

Liberty Mutual Group broke ground last week on a $300 million, 22-story office building in the Back Bay area of downtown Boston. The site is the former home of a Salvation Army building and the Benjamin Franklin Smith Building, both of which Liberty Mutual acquired in 2009 after having evaluated other cities across the United States for its expansion.

The international insurance company plans to use the new building, which will meet the requisite standards for U.S. Green Building Council LEED Silver certification, and consume 20 percent less energy than the average large modern office facility, as its global headquarters.

But some critics have pointed out that, by developing its own office building to accommodate company expansion, Liberty Mutual is not impacting the Boston office market in terms of vacancies or absorption. (Downtown Boston’s average vacancy rate for Class A office space in the third quarter of 2010 was 11 percent--an increase from the second quarter vacancy rate of 10.7 percent.) Those who disapprove of Liberty Mutual’s decision to build--instead of lease--so much square footage when just over 5 million square feet of premier space is available for direct lease downtown felt that it should have opted to benefit Boston’s office market.

However, while Liberty Mutual’s massive office project has no statistical impact on Boston’s office market, it will affect the city’s economy. The development endeavor will create 500 construction jobs and, ultimately, add 600 full-time positions within the new building. It will also bring in a total of $82 million in new real estate tax revenue for Boston over a 20-year period. Boston Mayor Thomas M. Menino noted that the building will revitalize the surrounding public realm with new public open space and streetscape improvements. Construction of the office tower is expected to wrap up in late 2012.