Nonprofits pounce on commercial properties in down market

There are few bright spots in the current commercial real estate landscape, but one set of buyers sees a silver lining.

Nonprofits, not a typically active demographic in real estate acquisitions, are flush with cash and buying up properties at a discount, according to Bisnow. Across the country, charitable organizations are increasingly taking advantage of lower prices to buy facilities, like offices and warehouses, with longer-term plans in mind, brokers say.

“We have a lot of nonprofit groups spread across the country, and we’re hearing the same thing: Those with money want to buy to create a legacy,” Carri Lyon of Cushman & Wakefield, told the outlet. 

Lyon co-chairs the firm’s nonprofit division, a buyerpool she says is well-funded at the moment. It’s been a record couple of years for charitable giving in the U.S. Revenues for nonprofit organizations reached $3 trillion in 2023, up from $1 trillion in 2020, according to the Giving Institute

“Many foundations, like arts groups, theater groups in the New York market, they are sitting on lots of cash. They don’t care about interest rates. They like that property prices are low,” she said. 

And prices are remarkably low for those prospective buyers. Commercial real estate pricing has dropped 21 percent from its March 2022 high, according to the outlet. In New York City, The Joyce Theater paid $16 million for a 58,000-square-foot office building in December from the Boy’s Club of New York. The Boy’s Club had paid nearly double that, $31.7 million, for the space in 2019, the outlet reported.

In Sacramento, the nonprofit charter school Visions in Education dropped $6.6 million on a 65,000-square-foot office building in September, which was about half of its previous sale price. 

There’s a range of advantages for nonprofits building up  their portfolios. Often, ownership means savings because municipalities don’t typically tax nonprofit organizations. Dealing with lenders is another leg up. 

“Nonprofits can secure different financing, more advantageous financing, than other commercial and private sector groups,” Brian Young, a principal with Avison Young told the outlet. “Now we’re seeing depressed office values. So your building is snapped up at a much lower cost on a per-square-foot basis.”

Despite the possible boon for buyers, not every nonprofits is getting into the real estate game. For some, their lack of experience and possible costs associated with ownership are too risky.

“Unfortunately, the nonprofits are not in a good position for the risk factor of owning real estate,” Chase Magnuson, founder of the consultancy Real Estate for Charities, told the outlet. It’s costly.”

–– Kate Hinsche