Distressed Office Deals Reset Market

Distressed office sales are beginning to set the tone for the market nationally. Transactions that once felt stalled are moving again, with sellers settling for losses and buyers stepping in with different playbooks.

More than 200 distressed office properties traded last year, up significantly from 2023, and early 2026 activity is already outpacing that momentum. Trades tied to foreclosures and bankruptcies alone totaled more than $5 billion. In some cases, the pricing gap is striking. Buildings that once commanded nine-figure valuations are trading at fractions of those levels, from downtown towers in Chicago selling for under $30 per square foot to assets in Denver and Washington, D.C. changing hands at prices that would have been unthinkable a decade ago.

In New York, discounted office trades are feeding a growing wave of office-to-residential conversions. Investors like David Werner have built a strategy around acquiring older office buildings at steep discounts, often with plans to convert them into residential. His latest deal in Hell’s Kitchen, at roughly a third of its 2018 price, follows that same model. Others, like Igal Namdar, are approaching the market from a different angle, targeting midtier buildings with enough income to justify a longer-term hold at a lower basis.

That conversion pipeline is increasingly being shaped by repeat partnerships and institutional capital stepping in earlier in the process. Nathan Berman’s Metro Loft and Idan Ofer’s Quantum Pacific Group are in contract to buy 1 Whitehall Street for just over $100 million, with plans to turn the Financial District building into rentals after its foreclosure out of the Chetrit Organization. It adds to a growing list of joint projects for the pair, including Midtown and Downtown conversions that are already in motion or financing.

In Midtown, the office tower at 135 West 50th Street, which turned heads in 2024 when it traded for just $8.5 million after an online auction and foreclosure-related distress, is now slated for a partial residential conversion. The plan envisions hundreds of apartments across much of the building, while still retaining some office and retail space.

What’s notable is how many different types of buyers are now active. Conversion specialists are pairing discounted acquisitions with redevelopment plans. Opportunistic investors are betting that today’s pricing leaves room for upside, regardless of use.

RXR’s $500 million recapitalization of 55 Broad Street, alongside Silverstein Properties and Metro Loft, is a good example. The project is one of the earliest large-scale office-to-residential conversions of this cycle, and the recap reflects growing investor interest in stabilized, post-conversion assets. With multiple large-scale conversions in the pipeline, including the former Pfizer headquarters in Midtown and other downtown projects, the city is starting to build a track record.

In South Florida, the shift has been more gradual. The region remains attractive to investors, but deal flow has slowed and buyers are being more selective. Some office trades are still getting done, including discounted sales with redevelopment potential, but many investors are waiting for better visibility on rates and the broader economy before jumping in.

Chicago is seeing some of the steepest discounts in the country, with sales often driven by distress rather than a vision for the future. Vacancy is still rising, and while some buildings are being torn down or converted, it has not been enough to offset shrinking demand. Similar patterns are emerging in Los Angeles as it continues to work through a wave of defaults tied to legacy debt, pushing large assets into discounted trades.

Across the country, the market is gradually finding its footing, with distressed trades doing the work of resetting pricing and defining next steps for the asset class.

There was plenty of other real estate news this week. We take a look at Zohran Mamdani’s first 100 days as New York City’s mayor, zoom out on the Oceanwide Plaza saga in Los Angeles and break down bidding wars in Chicago’s North Side.

What Mamdani’s first 100 days have meant for real estate

Mayor Zohran Mamdani’s first 100 days have reshaped New York’s housing conversation, elevating tenant voices while deepening tensions with landlords and the City Council. The administration launched “rental ripoff” hearings and revived tenant protection efforts, focusing on cracking down on fees and poor housing conditions, though landlord groups say their concerns are being sidelined.

The Oceanwide Plaza saga: Sean Burton’s Cityview becomes backup for graffiti-covered eyesore

More than a decade after breaking ground, and more than a billion dollars later, the development of Oceanwide Plaza stalled when its owner ran out of money. Now, the now notorious three-tower complex’s $470 million offer is encountering pushback in bankruptcy court, and more details are emerging on an all-cash offer behind the scenes.

“Absolutely insane”: Bidding wars take over in Lincoln Park, Lakeview

Bidding wars are reaching a fever pitch in Chicago’s North Side, with homes in neighborhoods like Lincoln Park and Lakeview routinely selling far above asking prices. Agents say traditional pricing strategies have broken down as limited inventory and aggressive buyers push deals to levels driven more by demand than comparable sales.

SEC investigation into Paramount’s past dealings heats up

The SEC is ramping up its investigation into Paramount Group’s past dealings, months after the office landlord’s $1.6 billion sale to Rithm Capital. The probe focuses on the company’s use of corporate assets, executive compensation and related-party transactions, including previously undisclosed payments to longtime CEO Albert Behler.

Mexican billionaire is mystery tenant behind 9 West record office lease

The mystery tenant who signed a record office lease at 9 West 57th Street is a Mexican billionaire who’s currently dating Emma Watson. Stefan Soloviev’s Soloviev Group signed a 10-year lease with Gonzalo Hevia Baillères, who is known as the “King of Silver” for his vast mining empire, surpassing the previous record set at One Vanderbilt.

Here’s where Michael Stern’s Miami projects stand amid $100M foreclosure suit

Michael Stern’s JDS Development Group is navigating market headwinds in Miami, where the firm is focusing on a pair of ambitious Brickell skyscrapers. After handing over control of his 1250 West Avenue project to a competitor, developer David Martin, Stern’s South Florida holdings have narrowed. Another project, the under-construction Mercedes-Benz Places, was hit with a $100 million-plus foreclosure lawsuit.

Elliman sues Shvo, Mandarin Oriental devs over unpaid fees

Michael Shvo’s Mandarin Oriental Residences is at the center of another lawsuit, this time filed by its former exclusive sales agent, Douglas Elliman. The brokerage sued the entity behind the development of 685 Fifth Avenue, led by Shvo, alleging the developer paid Elliman just half of its fee after ousting it from the project late last year.

Billionaire Jeff Greene selling West Palm site to Terra, partner for over $90M

Billionaire developer Jeff Greene is selling a waterfront site in downtown West Palm Beach to David Martin’s Terra and partners, who include BH Group, for more than $90 million. Greene, who confirmed the sale price exceeds $90 million, is under contract to sell the 1.6-acre assemblage. The developers likely plan a luxury condo tower, as a 350-foot-tall building can be constructed on the site.