US Office Market Sees Resurgence with Key Sales in 2024

The US office market experienced a turbulent 2024 as owners grappled with falling valuations and high vacancies. Yet, the year saw a resurgence in activity, with sales volume climbing 17% compared to 2023, according to MSCI Inc. data. As Bloomberg reported, landmark transactions, ranging from stake sales in trophy properties to distressed asset acquisitions, reflect landlords’ evolving strategies for navigating this challenging environment.

Highlighting Key Deals

980 Madison Ave., New York — $560M

• The Deal: RFR Holding sold the Manhattan building for $560M to Bloomberg Philanthropies.
• The Takeaway: Sellers often found institutional buyers who planned to repurpose or occupy properties. Notable examples include Extell Development, which converted a Madison Avenue tower into luxury housing and retail.

One Vanderbilt, New York — 11% Stake at $4.7B Valuation

• The Deal: SL Green Realty sold an 11% stake in the trophy Manhattan office to Japan’s Mori Building Co.
• The Takeaway: High-demand trophy buildings, like One Vanderbilt near Grand Central Terminal, maintain appeal as companies seek premium spaces to attract employees.

Pacific Corporate Towers, California — Debt Converted to Equity

• The Deal: Beacon Capital Partners and 3Edgewood acquired a majority stake in the $485M senior loan on the property at a 60% discount.
• The Takeaway: Distress underscored the steep valuation declines, with debt-to-equity conversions highlighting recovery efforts in struggling markets.

701 Brickell, Miami — $443M 

• The Deal: Elliott Investment Management purchased the office tower from Nuveen Real Estate, marking the second-largest office sale in Florida history.
• The Takeaway: Miami’s Brickell district remains a hotspot for finance and tech firms, driving demand for high-quality office spaces and record-breaking rents.

5 Times Square, New York — Debt Converted to Equity

• The Deal: Apollo Global Management converted mezzanine debt into an equity stake in the revamped office building.
• The Takeaway: Owners increasingly leverage creative solutions, such as equity conversions and recapitalization, to address the valuation gap.

Market Context

Tenant demand showed signs of recovery, with US leasing up 11.5% YoY in Q324, according to CBRE Group. However, vacancies remain high, reaching 19% nationally and up to 37% in markets like San Francisco. Refinancing challenges loom large, with $300M in office-related debt maturing next year.

What’s Next?

Adaptive strategies like debt restructuring and asset repurposing will be key as the office sector prepares for a critical year in 2025. Investor interest in distressed properties and trophy assets suggests a bifurcated market where quality locations thrive while weaker assets struggle. Expect ongoing transformation in office real estate as owners navigate high stakes and evolving demands.