The US office market is in freefall. Aging towers are trading at fractions of their former worth as owners finally admit that the post-pandemic workplace is not coming back.
From Chicago to Denver to Washington, DC, once-pricey buildings are being unloaded at discounts that would have been unthinkable just a few years ago, in some cases fetching less than 10% of their prior sale prices, according to the Wall Street Journal.
One of the most dramatic examples takes place in Chicago. Developer Marc Calabria picked up a 485,000-square-foot office property for just $4 million, a steep fall from the $68.1 million it commanded roughly a decade ago. That is a staggering 94% markdown.
Out in Denver, real estate investor Asher Luzzatto acquired the Denver Energy Center for $5.3 million following foreclosure, despite the complex selling for $176 million in 2013 — a near 97% markdown.
Even the federal government is cutting losses, with the General Services Administration offloading a massive DC building for $24 million, a sliver of its former value.
These markdowns reflect a long-delayed reckoning. Landlords and lenders spent years extending loans and injecting fresh capital in hopes that office demand would rebound. Instead, hybrid work patterns have stuck, borrowing costs remain elevated and filling vacant space has become increasingly expensive.
“People who don’t know real estate would be shocked at the level of distress,” Luzzatto told The Journal.
The pain is not evenly distributed. Trophy towers in prime corridors of New York City and San Francisco are still commanding strong rents and, in some cases, turning profits. But across much of the country, even relatively solid office buildings have lost significant value, with average declines hovering around 35% from peak levels, according to Green Street.
For a new class of buyers, the collapse is creating opportunity. Investors are snapping up buildings at bargain prices and rethinking their purpose entirely.
Calabria, for example, plans to transform his Chicago acquisition into an indoor agriculture hub, partnering with Farmzero to produce large volumes of fruits and vegetables using hydroponic systems.
“The buy-in at this distressed price allows us the opportunity to afford change,” Calabria told the outlet.
Rock-bottom acquisition costs are also accelerating office-to-residential conversions, a trend gaining momentum nationwide.
With purchase prices so low, developers can justify expensive structural overhauls, from carving out interior atriums to redesigning floor plates for apartments. More than 90,000 units are currently in the pipeline for conversion across the country, a sharp increase from last year, with New York City at the forefront and cities like Chicago and Washington, DC following with the help of tax incentives.
Distress is also showing up in both urban cores and suburban office parks. In Texas, for example, several suburban office properties have traded at more than half off their pre-pandemic valuations, with some buyers opting to tear them down entirely to make way for industrial projects.
Behind the scenes, lenders are playing a key role in pushing deals forward. Banks and special servicers, having spent years building reserves against troubled loans, are increasingly forcing sales or taking control of assets and moving them off their books.
Investors purchased 204 distressed office buildings last year, up from 133 the year prior, totaling $5.2 billion in transactions. Early 2026 data shows the pace continuing to climb.
One such buyer, Hossein Fateh, recently purchased a sprawling government-leased building in Washington, DC and is planning a major residential conversion that could cost hundreds of millions of dollars. The economics only pencil out because of the low purchase price.
If the price wasn’t so low, “this deal wouldn’t work,” he said.
