Prior to the COVID-19 pandemic, office space was at a premium in cities across the country, especially in markets like New York City. However, with many formerly commuting employees now working from home, many companies have begun to offload their lower-value office buildings, often at a deep discount compared to their original value. As a result, there is a potential opportunity for companies that may be searching for relatively affordable office space in the city.
Work From Home and the End of the Mandatory Commute
While some companies held onto hope that they could force employees to return to their regular commute, these efforts have largely failed. As a result, many businesses have been left with large office buildings that remain mostly empty, massive investments of money that are no longer required for them to do business. As a result, many of these companies are trying to rid themselves of office space they no longer need.
Companies Offloading Their Office Buildings
This has resulted in a glut of commercial real estate that has not been seen in years, increasing sales activity in a market that was previously seen as “frozen.” Only a few years ago, people competed for the valuable office buildings found in the heart of New York City and other major cities, often paying a premium to do so. Now, however, companies are offloading their least valuable office space in large numbers, vastly increasing the amount of available commercial real estate.
Selling Office Space at a Discount
The consequence of everyone trying to sell their office space all at once is that they need to do so at a considerable discount, potentially taking a 50% loss or more compared to the original purchase price. This is particularly problematic for some, as many companies took out substantial loans to be able to buy these buildings in the first place. However, even taking that loss is preferable to maintaining office buildings they no longer have a use for.
An Opportunity For Some
That being said, there is still some demand for office buildings, and those companies now have an opportunity. The deep discounts and sudden glut of inventory mean that the office space is now easier to purchase than it has been in years, even in locations where real estate is normally at a premium. For some buyers, that means the market may be incredibly favorable, more than it has been since before the pandemic.
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