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Office market may have found its bottom: report

Transaction volume leveling, price discovery surging

Office Market May Have Found Its Bottom: Report

(Photo Illustration by The Real Deal with Getty)

Office landlords sweating out a cloudy market may finally be seeing some light peek through. 

Years of price drops in the national office market may come to an end soon, according to a new report from Moody’s Analytics. 

“We are seeing signs that the market is beginning to function in a healthier way,” the report’s authors stated, citing a rise in price discovery and an easing of declining transaction volume.

In the 15 months analyzed through March, Bloomberg reported that Moody’s found only three sales in public records that occurred at a price point of at least $100 million more than the property’s previous transaction. Since then, however, seven such deals have been found in records, indicating a boost in price discovery.

Moody’s is far from the only company to be optimistic about the state of the property market. Months ago, Blackstone president Jon Gray said that it appeared the commercial real estate market was bottoming. The company’s flagship property fund spent months eschewing the office market, essentially exiting it altogether in favor of other property types, such as student housing and data centers.

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The report noted that office owners and lenders are better positioned than before to evaluate possible losses, but those losses could still be coming for many. 

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Distressed property owners are still staring down significant losses as they hunt for liquidity. This month, an unidentified Chinese investor bought the 25-story 801 Tower in Downtown Los Angeles for $60 million. Barings, the North Carolina-based seller, dealt away the property for $118 million less than the office building sold for a decade earlier.

In some parts of the country, the office market’s stated demise has proven to be premature. In New York City, over $21 billion in office transactions have unfolded since the first full Covid-impact year, 2021.

— Holden Walter-Warner

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