CHICAGO — The cracks in the nation’s commercial real estate sector are becoming impossible to ignore — and Chicago just offered up one of its most dramatic examples yet.
A 155,000-square-foot office building in downtown Chicago has been sold for just $17 million, or roughly $109 per square foot. That’s a staggering 61% loss from the $44 million price it last fetched in 2017, according to Crain’s Chicago Business.
What’s Driving The Plunge In Value?
Industry experts point to a combination of high interest rates, remote work, and an oversupply of office space as the culprits behind this dramatic pricing collapse.
“Thanks to remote work and higher interest rates, real estate investors can buy downtown office buildings on the cheap these days,” Crain’s reported.
And when a motivated seller is under pressure to unload multiple buildings at once, the markdowns get even steeper.
Negative Equity Hits Chicago’s Core
Many office buildings in Chicago’s central business district are now worth less than the mortgages attached to them, experts say. This condition — known as negative equity — is fueling a wave of financial distress and making refinancing nearly impossible.
“Many office properties in the heart of the [Chicago] are now worth less than the mortgages tied to them,” Crain’s noted. “It’s fueling a historic wave of distress.”
A National Trend With Local Pain
The Chicago transaction isn’t isolated. Cities across the country — including San Francisco, New York, and Los Angeles — are also seeing office values plummet.
But the scale of the drop in this case — more than 60% — signals growing urgency. Investors are beginning to watch for opportunities in distressed assets, while developers with older or vacant office space are being forced to reevaluate their portfolios.
By The Numbers: Chicago Office Building Deal
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Size: 155,000 sq. ft.
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2024 Sale Price: $17 million
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2017 Sale Price: $44 million
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Loss: $27 million (61%)
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Price Per SF: $109
Are you seeing the effects of commercial property decline in your neighborhood?
Do you think downtown office buildings can bounce back, or is it time to rethink their future?
Share your insights and local tips in the comments at ChicagoSuburbanFamily.com.
