For the beaten-down office market, 2024 was a year of diverging fortunes for owners as transactions started to pick up.
Office landlords, confronted with the reality of plunging valuations, started to strike deals to sell properties they no longer wanted — often at steep price cuts — while scoring new equity investments on high-quality towers. Overall, office sales volume for the year through November jumped 17% from the same period a year earlier, according to MSCI data.
The top deals of the year — from a stake sale in 1 Vanderbilt to a distressed offloading of Pacific Corporate Towers in California — show how landlords and lenders are grappling with the market’s changes. And it points to how the office market may play out through 2025, with about $300 billion of debt backing those buildings still needing to be refinanced within the next 12 months, according to an MSCI estimate.
Here’s a rundown of some of the biggest US single-asset office sales this year through November:
980 Madison Ave., $560 million
The deal: The building, located just one block from Central Park, used to house famed art gallery the Gagosian. But owner RFR Holding, which is also currently in a battle over the iconic Chrysler Building, struck a deal earlier this year to sell it for $560 million, according to property records.
The buyer was Bloomberg Philanthropies, according to reports. (Bloomberg Philanthropies is the philanthropic organization of Michael Bloomberg, the founder and majority owner of Bloomberg LP, which owns Bloomberg News.)
The takeaway: Sellers of office properties often found willing buyers in organizations that were seeking to possibly occupy the space. The Gas Company Tower located in downtown Los Angeles — a particularly hard hit area for office landlords as vacancies soared — was bought by the County of Los Angeles for $200 million, 68% below its 2020 appraised value.
Other buyers snapped up offices with intentions of doing something else with the property. Extell Development, known for its work on Billionaires Row, bought a Madison Avenue tower and is planning to build luxury housing and retail at the site. Developer Vanbarton Group purchased 77 Water St. in the Financial District for an office-to-housing project.
1 Vanderbilt, 11% stake in $4.7 billion building
The deal: SL Green Realty sold an 11% stake in 1 Vanderbilt to Japan’s Mori Building Co. in a deal that valued the skyscraper at $4.7 billion. The tower is fully leased after opening in the depths of the pandemic. Its proximity near Grand Central Terminal has been a selling point for companies seeking brand-new space near the major transportation hub.
The takeaway: Owners of trophy office buildings in New York City have continued to see heightened demand for their properties, as tenants including finance companies and law firms battle for the best spaces to draw employees back into the office.
There are signs that tenant demand in the U.S. is starting to bounce back. Leasing rose 11.5% in the third quarter from a year earlier, according to CBRE Group data. The amount of available office space to rent in the U.S. declined in the third quarter for the first time in more than five years, according to brokerage Jones Lang LaSalle. And Vornado Realty Trust’s Steven Roth said in November that leasing in Manhattan was at the “foothills of recovery.”
But vacancies in the U.S. remain high at 19%, according to the CBRE data. And it’s particularly tough in certain cities including San Francisco, where the vacancy rate was 37%, and Washington, where it hit 23%.
Pacific Corporate Towers, California, converted debt to equity
The deal: Beacon Capital Partners and 3Edgewood acquired a majority stake in the $485 million senior loan on Pacific Corporate Towers — a three-building complex in El Segundo, California — at a greater than 60% discount, according to a person with knowledge of the deal. The former owners, Starwood Capital Group and Artisan Realty Advisors, had $605 million in debt, including a $120 million mezzanine loan, on the buildings they bought in 2017, before surrendering their stakes this year in a deed-in-lieu of foreclosure deal.
The takeaway: The steep decline in office valuations is put in stark relief when compared with properties’ debt. The relatively new building at 799 Broadway sold for less than the value of the Blackstone Mortgage Trust loan backing the property.
Appraisals show just how sharp the drops were. The valuation of the 55-story Bank of America Plaza in downtown Los Angeles fell by 69%, according to a new appraisal.
In 2024, the value of 33 troubled commercial mortgage-backed securities tied to offices was cut by more than 51%, according to data compiled by Bloomberg that looked at CMBS valued at more than $100 million. The list includes buildings in Seattle, Chicago, Philadelphia and Charlotte, North Carolina, among other cities.
Within the CMBS market, bonds backing what were seen as premium properties — single- asset, single borrower deals — were getting hit. Investors in AAA rated bonds backing 1740 Broadway in Manhattan got less than 75 cents on the dollar following a loan sale, the first top-rated CMBS losses since the global financial crisis.
701 Brickell, Miami, $443 million
The deal: Elliott Investment Management and its partner bought 701 Brickell — an office tower located in Miami’s financial district — for $443 million from TIAA’s Nuveen Real Estate. The transaction was the second-largest office sale in Florida’s history, according to brokerage JLL.
The takeaway: The Brickell area has been a hotspot for many finance and tech firms seeking to grow their South Florida presence since the pandemic, and some new buildings in Miami are charging rents that have soared past local price records, nearing levels normally seen across Manhattan’s best towers.
Meanwhile, finance firms have ramped up real estate bets, seeking to fill a gap left by banks and other institutional players. Elliott has backed property lenders including Tyko Capital and Ascent Developer Solutions.
5 Times Square, debt converted to equity
The deal: Apollo Global Management this year converted mezzanine debt into an equity stake in 5 Times Square, a revamped office building that offers amenities including two golf simulators.
The takeaway: Many office owners have been forced to find ways to inject new capital into their buildings given the gap in valuations. In certain instances, that involved putting in more of their own money or having lenders convert debt stakes into equity.
With distress mounting, alternative lenders and investors readied new capital. Commercial-property lender Madison Realty Capital closed a debt fund at $2.04 billion inequity commitments, while SL Green raised $250 million from Canadian pension Caissede Dépôt et Placement du Québec for a fund that will focus on distressed credit opportunities in New York’s office and retail sectors.
Note: The data is from MSCI and runs through November. Deals such as Munich Re’s purchase of the rest of the interest in 320 Park Ave. and Cousin Properties’ deal to acquire an Austin office tower occurred after.
