Office buildings across the U.S. are selling at knockdown prices after the commercial real estate market’s recovery in the wake of the Covid-19 pandemic never materialized.
Some spaces have devalued by as much as 90 percent, according to The Wall Street Journal, forcing private owners, and even the government, to swallow multi-million dollar losses.
The outlet reports of a recent purchase by a real-estate developer in Chicago, who bought a 485,000-square-foot office building for $4 million. 10 years ago, the building was sold for $68.1 million.
A two-building complex housing the Denver Energy Center was sold for $176 million in 2013, and bought in December last year by developer Asher Luzzatto for just $5.3 million. Last month, the General Services Administration sold a 940,000-square-foot space in Washington, D.C. to be converted into residential blocks for $24 million.
The significant price drops are a byproduct of the shift towards home working that occurred during the global pandemic, which has resulted in many workers still spending less time at the office.
While lenders continued to pour in more money and extended loans, many are now concluding that such a recovery is not possible.
“People who don’t know real estate would be shocked at the level of distress,” Luzzatto told The Journal.
While such heavily discounted office spaces have appeared, the outlet notes that most are for buildings that are typically lower quality and in less-than-prime locations. Rent for spaces in metropolitan hubs such as New York and San Francisco is still being raised and sales are still generating profits.
According to data firm MSCI, the number of distressed buildings, commercial properties facing severe financial trouble, high vacancy rates, or poor physical condition, was 204 last year, up from 133 in 2024.
The firm notes that the sale of such buildings in the first two months of 2026 is already up 24.5 percent from the same period last year.
“We’re six years from the shock of Covid,” Jim Costello, an executive director at MSCI, told The Journal. “But that’s how long it takes someone to capitulate and give up such a highly valued asset.”
