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Many office buildings in D.C. are now worth no more than the land they sit on.
The values of older commercial buildings in D.C. have been falling over the last few years as the pandemic-induced remote work shift led many companies to downsize their footprints and to consolidate into newer buildings.
As older buildings have become vacant, and as the prospects for redeveloping them have become more difficult, properties have traded for far below what local real estate executives had ever previously envisioned.
The bright side for the city, investors said Thursday at Bisnow’s D.C. State of the Market event, is that values can’t fall any further.
“I think we’re at the bottom,” Bernstein Management Corp. Senior Vice President of Investments Terra Weirich said at the event, held at 600 13th St. NW.
“When office values are closer to land value, even lower in some cases than what we thought land used to be worth, I think we’re at the bottom.”
But just because values have hit bottom, Weirich said, that doesn’t mean they are going to shoot back up.
“The question is, ‘How long are we going to stay here?'” she added. “It is hard to see major drivers for significant rent growth or significant cost reduction for development to make sense again.”
A series of sales starting in 2023 showed many older buildings were trading for about a third of their prior sales price, and pricing was reaching as low as $150 per SF, according to a Bisnow analysis in January 2024.
