Empty Chicago Office Buildings are selling at unheard-of prices. The Wall Street Journal is reporting that nationwide, just a few of the sales include…
1 – In Chicago, real-estate developer Marc Calabria bought a 485,000-square-foot office building for $4 million. The building sold for $68.1 million a decade ago.
2 – Developer Asher Luzzatto paid a mere $5.3 million for the Denver Energy Center, after a foreclosure process. The two-building complex sold for $176 million in 2013.
3 – Last month, the General Services Administration (GSA), the U.S. Government’s
Landlord, sold a 940K square-foot building to a residential converter for $24 million, a tiny fraction of its value from a few years ago.
Landlords and their lenders held onto their office towers for years, hoping for a turnaround after Covid. Now, they’re accepting enormous losses.
Owners and creditors are capitulating to the reality that more employees are splitting their work time between home and office. They are also resigned to stubbornly higher interest rates, which lower property values and make it harder for buyers to borrow.
Not every office building goes for a few pennies on the dollar. The discount is most apparent in poorer-quality buildings, often in undesirable locations.
But most office sales reflect the sector’s steep decline. Even higher-quality properties on average have dropped about 35% in value from their peak, according to analytics firm Green Street.
Let me leave you with this…
Buyers are picking up office towers in major U.S. cities for next to nothing. These distressed sales are paving the way for new owners to pursue redevelopment ideas that would have been unthinkable just a few years ago.
Calabria in Chicago plans to convert the office building into an urban farm and education center. The company is working with Farmzero, which will use grow lights and hydroponic farming techniques to produce millions of pounds per year of berries, tomatoes, lettuce, herbs and other vegetables.
Rock-bottom prices are also accelerating the move to residential conversion. Developers who bought at steep discounts can now justify costly structural changes, that would have been financially unworkable at higher valuations.
Many buildings in our once sought after financial district are now being re-developed into residential housing. Of course, given the current administration, a substantial portion of those housing units are set aside for Section 8 Tenants.
Just imagine. The street where Marshall Field, James Kraft, and Charles Walgreen once did business is becoming Cabrini Green.
Investors purchased 204 distressed office buildings nationwide last year, up from 133 sales in 2024, according to data firm MSCI. Sales of these properties, which were auctioned out of bankruptcies or sold through foreclosures and lender seizure, came to $5.2 billion.
That being said, if you need an office building, even a smaller one, now would be the time to buy. As an investor, you always buy when everyone else is selling.
I purchased the building I’m now sitting in at the end of the last real estate recession for $160K. It was on the market a few short years before I bought it for $1.1M.
Think about it.
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