At Least In San Francisco, Some Office Buildings Selling for 60% Of Their Former Value

In an article written by John McNellis, one of the top commercial real estate gurus, and published in the SF Business times April 28, 2023, John lays out the case that at least in San Francisco, office buildings may have lost 60% if their value, compared to just a few years ago before Covid taught workers and employers that working from home was more than viable. He cited a number of examples of major office properties that are being sold at half or less than previously valued, and there are some where the value might be only the land it is sitting on, less demolition. John also suggests that many banks will not extend a loan coming due as there may be negative equity, and lenders might be unwilling to fund the expensive tenant improvements required to release office buildings. Banks also may not want to take back a foreclosed office building, and might prefer instead to significantly discount the note, sell that at a loss and get this off their books. Where is the silver lining in all this? Perhaps the buyers of these discounted notes, who in turn foreclose and take over buildings at a fraction of their previous value, can charge low enough rental rates to fill up their buildings and create sizable cash flows for their investors.