Providence’s Most Valuable Office Building Devalued 40% - Major Implication for City’s Finances

Providence’s Most Valuable Office Building Devalued 40% - Major Implication for City’s Finances

The most valuable office building in Providence was devalued by 40%, according to a new appraisal of the building.

The report by the real estate data firm Trepp, secured by GoLocal, unveils a dramatic decrease in the value of 100 Westminster Street — the preeminent Class A office building in the city. 

The gleaming glass tower owned by Paolino Properties was valued at $65.3 million in an appraisal in 2013.

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Now, the building’s value has been dramatically downgraded to $38.3 million — a decrease of more than 40%.

The implications are significant to downtown Providence and the city's tax structure.

The building is the 8th highest taxpayer in the city — paying nearly half of one percent of Providence’s real estate taxes. The annual tax bill is $1.8 million.

Joe Paolino, the former Mayor of Providence and the managing partner of Paolino Properties said, “The building is now worth less than half of what I purchased it for.”

“The impact to the city is significant because as the value of the building goes down, so does the tax revenue,” said Paolino. “This is going to have a domino effect on other office buildings.”

He added, “Every major office building owner is facing this challenge. The lack of a five-day work week has made many companies reduce their office space."

According to Trepp, 100 Westminster has seen a significant decline in occupancy.

In 2021, the occupancy was 96%.

In 2022, it dropped to 89%.

In 2023, down to 80%.

And Paolino said he expects the occupancy to drop further. According to Trepp, “Data shows the top two tenants with leases ending in 2026 or earlier. Those two leases total about 30% of the square footage.”

In March, Paolino purchased the Amica building downtown. “We are in negotiations to move some tenants from Amica to 100 Westminster.,” said Paolino.

“We will look at converting the Amica building to residential,” said Paolino.

 

Warning Signs of a Doom Loop

In April, the Wall Street Journal report unveiled the dangerous downward spiral some cities are facing.

“Cities such as San Francisco and Chicago are trying to save their downtown office districts from spiraling into a doom loop. St. Louis is already trapped in one. As offices sit empty, shops and restaurants close and abandoned buildings become voids that suck the life out of the streets around them. Locals often find boarded-up buildings depressing and empty sidewalks scary. So even fewer people commute downtown. This self-reinforcing cycle accelerated in recent years as the pandemic emptied offices,” reported the WSJ.

Office buildings represent five of the top 20 real estate taxpayers, and the top 20 taxpayers represent nearly 20 percent of the city's total tax levy.

 

 

COVID, Superman, Kennedy Plaza, and Washington Bridge

The factors working against the office space are piling up.

"COVID changed everything, and workers are not coming back to the office five days a week," said Paolino. "It will take four years to redevelop Superman and the Washington Bridge does impact some workers."