Manhattan’s frigid office market is poised to pick up, but sellers may see some lukewarm deals.

Owners of Some Lower-Quality Office Buildings in New York Are Selling at Discounts, WSJ Report. Developers in the city are assessing the level of pain they are willing to inflict on themselves, as expected building values ​​fluctuate frequently in a weak post-Covid office leasing environment.

Last week, Scott Rechler’s RXR defaulted on its office building at 61 Broadway in the financial district. RXR is handing over ownership to whoever buys the $240 million defaulted loan, which could sell for about half the building’s $440 million valuation from 2016.

In March, Empire Capital Holdings agreed to buy 529 Fifth Avenue in Midtown from Silverstein Properties for $105 million. Less than three years ago, Silverstein refinanced the property for $171 million and recently spent $20 million on renovations.

That same month, Brookfield Properties bought back a piece of land at One Liberty Plaza from its partner, the Blackstone Group, which occupies 2.3 million square feet. The sale was valued at $1.5 billion six years ago and just $1 billion in the most recent sale.

While the discount may disappoint sellers, it also presents an opportunity to revitalize the office market after it was stalled by subdued back-to-office activity and high interest rates.

“We’re starting to see thaws and more product coming to market,” Eastdil Secured’s Gary Phillips told the publication.

Properties sold at discounted prices are of inferior quality to top builds and are the beneficiaries of the cliché “go for quality”. These buildings still need tenants who have an incentive to bring employees to the best space they can afford. Landlords prefer to move smaller properties to try and focus on making better properties profitable.

The next foothold in the Manhattan office market could be Newmark, which is marketing $60 billion in commercial assets owned by defunct Signature Bank. Doug Harmon, co-head of capital markets at the firm, said the sale (or sale) could be a “catalyst” for the market.

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