BOMA Advocacy Report: The Impact of Transfer Taxes on Commercial Real Estate 

The latest BOMA Advocacy Report on Transfer Taxes, created in collaboration with The Center for State Policy Analysis at Tufts University, and supported by Yardi CommercialEdge Research, examines the effects of real estate transfer taxes (RETTs) on commercial properties across the United States. These taxes are often proposed as a means to generate revenue for public services, including affordable housing programs. However, the report argues that their long-term economic consequences far outweigh the benefits. The findings reveal that transfer taxes discourage investment, reduce transaction volumes, lower property values, and ultimately fail to meet revenue expectations in many cities across the nation. 

How Transfer Taxes Are Defined 

Transfer taxes are one-time fees imposed upon the sale of commercial real estate properties, differing from annual property taxes, which are paid regularly by property owners. Transfer taxes are only collected at the time of sale, typically from the seller—though some cities may charge the buyer or split the responsibility. These taxes can vary widely across jurisdictions, with rates reaching as high as 6% of the property sale price in cities like San Francisco. 

How Transfer Taxes Affect CRE Transactions 

Reduced Sales Activity 

One of the most significant consequences of transfer taxes is the decline in commercial real estate transactions. The report highlights that higher tax rates on property sales disincentivize buyers and sellers, causing fewer deals to close. The decline in sales not only reduces immediate tax revenues but also limits economic activity tied to property transactions, such as leasing, renovations, and adaptive reuse projects. 

Lower Property Values and Market Uncertainty 

Transfer taxes directly contribute to lower property values, given that buyers need to factor in the additional cost when negotiating prices. In many cases, property owners are forced to absorb the tax burden by reducing asking prices, which decreases overall commercial property valuations in the market. This trend has been particularly harmful in cities where office markets are already struggling due to high vacancies and shifting workplace trends. 

Additionally, the introduction of transfer taxes creates market uncertainty, making it difficult for investors to plan long-term strategies. As a result, cities with higher transfer tax rates often see a decline in CRE sales and redevelopment projects 

Revenue Shortfalls and Unintended Consequences 

Despite their intended purpose, transfer taxes frequently fail to generate the expected revenue. The report points to several cities where projected tax revenues have fallen short due to reduced sales activity and lower property valuations. This creates a ripple effect where municipalities not only lose out on transfer tax revenue but also experience declining property tax collections, as lower valuations translate into lower assessments. 

Additionally, transfer taxes discourage redevelopment and adaptive reuse projects, which are crucial for revitalizing urban areas. In cities where struggling office buildings could be converted into residential or mixed-use spaces, high transaction costs keep potential buyers and developers from undertaking these projects. 

Boston: A Case Study in Transfer Tax Impact 

The BOMA report compared the total value of local commercial real estate against annual commercial sales data provided by Yardi CommercialEdge to track changes in sales volume over time and estimate potential revenue from a commercial property transfer tax.  

This was applied to a number of key commercial real estate markets across the nation, including Boston, where the CommercialEdge data showed that the value of all commercial property fell 3% in 2024. This happened amid the city’s substantial challenges due to rising vacancies and declining office demand. The latest CommercialEdge Office Report also showed that vacancies in Boston have risen to 17.4% in January 2025, representing a 490-basis-point increase year-over-year. 

Boston’s office market has also struggled with declining sales volume as investors hesitate to purchase properties amid economic uncertainty and tax burdens. At the same time, transfer taxes have added financial pressure, further driving down property valuations. Weakened leasing demand has also contributed to rising vacancies, as many businesses opt for smaller office spaces or relocate to suburban markets. 

The proposed transfer tax in Boston could exacerbate these issues, discouraging investment and pushing businesses toward more tax-friendly cities. The BOMA report projects up to $3 in losses for every $1 in expected gains from commercial properties if the Boston’s transfer tax proposal is adopted. 

Final Thoughts 

While transfer taxes are often promoted as a tool for funding public programs, the BOMA report demonstrates that they come with significant potential economic setbacks. The findings suggest that these taxes might reduce market activity, lower property values, and fail to generate stable revenue streams for localities, ultimately having more negative outcomes than positive ones. All cities considering new or increased transfer taxes should weigh the potential consequences carefully, as they may further weaken already struggling CRE markets. 

By addressing these challenges through alternative policy measures, cities can fuel investment, support redevelopment efforts, and ensure a healthier overall commercial real estate landscape. 

Find more detailed information in the extended BOMA report.