More and more owners of office buildings are selling real estate at sharply reduced prices. This suggests that they do not expect that there will be a turnaround in the office space market in the near future.
Property owners are starting to sell office buildings at bargain prices, which is a sign that the downturn in the market is moving into a new phase, when more and more landlords are ready to capitulate.
The cost of office buildings has steadily declined during the pandemic, while higher interest rates have also negatively impacted the sector, making it much more difficult for owners to refinance real estate or finance the building improvements needed to attract tenants.
A sharp drop in prices, in turn, will put even more downward pressure on the office real estate market.
Ten-X, one of the largest online auctioneers of commercial real estate, put 91 office premises up for sale in the first quarter, which is 44% more than in the first quarter of 2022. Similar growth is expected in the second quarter of this year.
In the first week of May, Ten-X held 11 successful auctions of office real estate, and most of them were sold at great discounts. On average, sellers entered the market at prices that were about 31% lower than initial expectations. Over the same period a year ago, sellers of office premises received an average discount of 7.1%.