The U.S. office market is entering a new phase of distress, with some properties selling at discounts exceeding 90% as landlords and lenders finally accept steep losses after years of holding out for a post-pandemic recovery.
High-profile sales across major cities underscore the scale of the downturn.
In Chicago, developer Marc Calabria recently purchased a 485,000-square-foot office building for just $4 million, down from $68.1 million a decade ago. In Denver, developer Asher Luzzatto acquired the Denver Energy Center for $5.3 million following foreclosure; the complex last sold for $176 million in 2013.
Even the federal government has joined the trend, with the General Services Administration selling a 940,000-square-foot building for $24 million, only a fraction of its prior value.
"People who don't know real estate would be shocked at the level of distress," Luzzatto told The Wall Street Journal.
The steep discounts reflect a convergence of long-building pressures on the office sector, including the persistence of remote and hybrid work, elevated borrowing costs, and the high expense of maintaining and leasing largely vacant buildings.
Office vacancies have climbed to record highs, with about 21% of space across major U.S. markets sitting empty in early 2026, up sharply from pre-pandemic levels as workplace habits continue to shift.
Workers now spend significantly more time away from the office than before COVID-19, reinforcing a structural decline in demand rather than a temporary downturn.
At the same time, higher interest rates have made refinancing difficult for property owners, forcing many to either inject new capital or surrender buildings to lenders, accelerating distressed sales.
While top-tier buildings in prime locations have fared better, much of the broader market has suffered sharp declines.
The office sector has effectively split into two tiers, with high-quality properties attracting tenants and older or less desirable buildings facing falling rents, rising vacancies, and collapsing values.
Even as some indicators suggest modest stabilization, including reduced construction and selective leasing gains, the market remains far from a full recovery.
Construction of new office space has dropped to historically low levels, and developers are increasingly focused on repurposing obsolete buildings rather than building new ones.
These distressed sales are also accelerating redevelopment efforts nationwide.
Calabria plans to convert his Chicago property into an urban farm and education center using hydroponic systems.
"The buy-in at this distressed price allows us the opportunity to afford change," he said.
Conversions from office to residential and other uses are gaining momentum, with tens of thousands of apartment units now being created from former office buildings as investors seek to reposition underused properties.
Industry data shows distressed transactions rising in recent years, with millions of square feet of office space changing hands under financial pressure as owners capitulate.
"We're six years from the shock of COVID," said MSCI executive director Jim Costello. "But that's how long it takes someone to capitulate and give up such a highly valued asset."
Theodore Bunker ✉
Theodore Bunker, a Newsmax writer, has more than a decade covering news, media, and politics.
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