Short sales have become increasingly common in the office sector as property values have fallen below outstanding loan amounts.
The 220,000-square-foot building is currently occupied by tenants including Battery Studios and ad agency AKA. Brokerage firm CBRE Group handled the sale, but none of the involved parties – Related, Empire, CBRE, Namdar, or CIBC – commented publicly on the transaction.
Office property values across the US have plummeted in recent years. Rising borrowing costs and the shift to remote work have significantly dampened demand. While newer or renovated buildings can still attract tenants at competitive rents, older properties like Related’s building are struggling to fill vacancies.
As more office building owners face looming mortgage maturities and rising costs, they are increasingly being forced to cut their losses through short sales or other distressed transactions.
A handful of recent transactions, including this one, offer a glimpse into how investors are currently valuing office buildings. One example is 1740 Broadway, which Blackstone bought for $605 million in 2014. The private equity firm was eventually forced to write off its investment and agreed to sell the property for roughly $186 million this year – a significant loss.
