The Collapse of the Downtown Office Model

One thing COVID did was prove that a lot of people don't need to work in the same location, to work together. Zoom, and the competing products have made remote work a possibility for a lot of people. That is destroying the market for the downtown office building. Rampant crime and homelessness isn't helping, either. Downtown Chicago Office Building Heads to Auction, $1M Opening Bid

The building highlighted in the article is at 216 West Jackson Boulevard. For those of you not familiar with Chicago, that is pretty much in the heart of The Loop. It is about half a block from Willis Tower, formerly Sears Tower, and a few blocks from the Federal Courthouse. It would be a long walk to City Hall in this weather, but not too bad in the spring or early summer.

The vintage 10-story office building at 216 West Jackson Boulevard will be up for grabs starting Feb. 20, with an opening bid of $1 million, Crain’s reported. Farbman Group brokers Bill Bubniak and Todd Szymczak are marketing the property, and Ten-X will handle the auction.

The opening bid equates to a little over $5 per square foot.

The building sold in 2013 for $120 per square foot, or just north of $22 million.

The hat tip goes to Second City Cop: The Quiet Collapse. SCC highlights a couple of other articles, but they are behind a paywall at Crain's Chicago Business. They are about other properties downtown, with similar declines in value.

Sure looks like downtown is hurting what with the looting, continually boarded up building fronts, restaurants going out of business and retail shops fleeing.

While SCC is focused on Chicago, this is not a Chicago only phenomenon. Batten down the hatches, a financial hurricane is on the way. (This is also via the SCC post.)

In the US, vast swathes of office space are empty. The landlords have some brutal decisions to make as $117billion is due in financial payments this year for commercial property. If the landlords cannot re-negotiate their loans, they go bankrupt, dumping property on the banks, which in turn will have to face their loan portfolios going delinquent. Which could of course cause them bankruptcy.

The article linked at the top, Second City Cop's posting, and the article above, from The Conservative Woman, are all worth a look. They won't make you happy.