{"id":1004765966,"date":"2025-07-30T12:13:58","date_gmt":"2025-07-30T20:13:58","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004765966"},"modified":"2025-07-31T05:13:08","modified_gmt":"2025-07-31T13:13:08","slug":"worth-the-risk-value-investors-chase-office-deals","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/worth-the-risk-value-investors-chase-office-deals\/","title":{"rendered":"Worth the Risk: Value Investors Chase Office Deals"},"content":{"rendered":"\n
\"550\n\t\t\t\n\t\t\t\t\n\t\t\t<\/svg>\n\t\t<\/button>
Andrew Brog of Brog Properties purchased 550 W. Washington in Chicago in January, paying $18.5 million in cash. The 327,396-square-foot office building sold for $111 million in 2013.
Image courtesy of Bradford Allen<\/em><\/figcaption><\/figure>\n\n\n\n

An office window cracked open several months ago. No big commotion, but quite a few heard it. What began as a trickle of sales transactions is now gaining momentum.<\/p>\n\n\n\n

Many buyers now believe<\/a> we have either reached or are close to the bottom and that, if primed, some great assets are just a flip away.<\/p>\n\n\n\n

Office sales reached $5.1 billion in May, a year-over-year increase of 41 percent, according to MSCI Real Assets. Meanwhile, sales in the long-favored industrial and multifamily sectors declined 26 percent and 18 percent in May when compared to 2024.<\/p>\n\n\n\n

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READ THE MAGAZINE<\/strong><\/a><\/div>\n<\/div>\n\n\n\n
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To be certain, the sector remains highly bifurcated. The newest and highest quality trophy buildings in markets such as Manhattan<\/a> are maintaining occupancy and value while many older and obsolete buildings in less desirable locations lack a path to any future use, observed Tim Bodner, partner & global real estate deals leader at PwC.<\/p>\n\n\n\n

\u201cThe office sector has clearly hit a different spot\u2014there\u2019s a lot more enthusiasm around it,\u201d he said. \u201cThat doesn\u2019t mean that there\u2019s not going to be more distressed transactions, but people are interested in offices again, for sure.\u201d<\/p>\n\n\n\n

\"Midloch\n\t\t\t\n\t\t\t\t\n\t\t\t<\/svg>\n\t\t<\/button>
Midloch Investment Partners and Hempel Real Estate acquired LaSalle Plaza in Minneapolis for a 77 percent discount to what it cost to build. The partnership improved parking and security and added amenities, including pickleball courts.
 Image courtesy of Midloch Investment Partners<\/em><\/figcaption><\/figure>\n\n\n\n

The search for pearls<\/h2>\n\n\n\n

This bifurcation holds water among value investors, who are trying to find struggling but suitably priced assets that can be resuscitated with capital and operating improvements.<\/p>\n\n\n\n

Andrew Brog of Brog Properties, for example, recently purchased two Chicago office assets for cash, at deep discounts. In January, he paid $18.5 million to Metropolitan Life Insurance for 550 W. Washington Blvd., a 372,396-square-foot, mostly vacant property that traded for a much heftier $111 million in 2013. That followed his purchase of 216 W. Jackson Blvd. from LNR Partners in April 2024. That one changed hands for just $2.5 million, an 89 percent haircut from 2013.<\/p>\n\n\n\n

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READ ALSO:<\/strong> Signs of Stability Emerge as Office Downsizing Eases<\/a><\/p>\n\n\n\n

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Brog focuses on upgrading or adding amenities such as gyms, employee lounges and conference capabilities. He is also finishing some space speculatively, for immediate occupancy, and providing potential tenants with models of how offices could be outfitted. Brog wagers that most companies have more certain space needs in mind after finalizing decisions on hybrid and remote work policies.<\/p>\n\n\n\n

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Value-add deals come in a lot of forms and tend to have a lot of inherent risk.<\/p>\n\u2014Greg Fuller, COO, Granite Properties<\/cite><\/blockquote>\n\n\n\n

Yet, CBRE pegged downtown Chicago vacancy at around 25 percent for the first quarter, which continues to give tenants leverage. In one case, an office user wanted Brog to grant a year of free rent. It also wanted him to buy out its existing lease and provide tenant improvement dollars that together tallied to an incentive package of around $200 per square foot for a 10-year lease, he said.<\/p>\n\n\n\n

\u201cThere are more tenants in the market today than there have been over the last five years, and space is slowly being absorbed,\u201d Brog pointed out. \u201cBut there\u2019s still a lot of desperation and vacancy out there.\u201d<\/p>\n\n\n\n

Discount-driven<\/h2>\n\n\n\n

Granite Properties is seeking opportunities at discounts to replacement cost across the strategy spectrum, from development<\/a> and value-add to core assets.<\/p>\n\n\n\n

For value-add deals in older buildings, the approach will likely require a replacement cost no higher than 30 cents on the dollar, said Greg Fuller, Granite COO. That\u2019s because the properties will likely need upgrades to elevators and HVAC systems, not to mention funding for leasing programs and the addition of amenities.<\/p>\n\n\n\n

\u201cYou have to buy assets at the right price because your return requirements are going to be higher than other office buildings that are well-located and leased that you can also pick up at a discount,\u201d Fuller said.<\/p>\n\n\n\n

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READ ALSO:<\/strong> Office Prices Slide as Discounts Surge<\/a><\/p>\n\n\n\n

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Midloch Investment Partners, a diversified value-add firm, tends to stick with apartments, industrial and retail. However, it couldn\u2019t pass on partnering with Hempel Real Estate to acquire LaSalle Plaza, a 621,629-square-foot office tower in downtown Minneapolis. The 2023 deal came at a 77 percent discount from building costs, said Andy Sinclair, CEO of Midloch.<\/p>\n\n\n\n

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I don\u2019t know if you\u2019re going to get the crazy good deals that existed before. Maybe it\u2019s just good deals now.<\/p>\n\u2014Andrew Brog, Brog Properties<\/cite><\/blockquote>\n\n\n\n

\u201cWhat that price tells you is that it makes no economic sense to build these today,\u201d he added. \u201cPeople coming back to the office want to be in top-quality space, and there were two or three ways for us to offer tenants one of best buildings in the market.\u201d<\/p>\n\n\n\n

The partners have focused on improving parking by acquiring a skyway-connected garage, updating the lobby, enhancing security and adding amenities, including restaurants and pickle ball courts, said Sinclair.<\/p>\n\n\n\n

\"MLG\n\t\t\t\n\t\t\t\t\n\t\t\t<\/svg>\n\t\t<\/button>
Late last year, MLG Capital acquired a seven-property, multi-tenant flex portfolio in the Minneapolis area. The project includes 67 suites.
Image courtesy of MLG Capital<\/em><\/figcaption><\/figure>\n\n\n\n

Flex cat out of the bag<\/h2>\n\n\n\n

Rather than going for conventional office, MLG Capital specializes in acquiring multi-tenant flex space and apartments. Late last year, the company bought a seven-property flex portfolio containing 67 suites in suburban Minneapolis for its MLG Private Fund VI.<\/p>\n\n\n\n

Like other value investors, MLG aims to buy discounted projects that provide opportunities to increase income, said Dan Price, principal & CIO at MLG. But it is becoming more challenging to find available multi-tenant flex space as capital has become increasingly attracted to the niche. The list includes office investors looking for alternatives, but also other first-time buyers.<\/p>\n\n\n\n

The high cost of constructing flex-space office suites, which can make up as much as 20 percent of the assets, is keeping a lid on already limited supply, Price pointed out. What\u2019s more, occupancy has improved in the category, and so the more typical play today is to ride strong rent growth versus finding properties with some vacancy that can quickly be filled.<\/p>\n\n\n\n

\u201cSome investors have avoided flex,\u201d Price said. \u201cBut the secret is out. In the last month, we\u2019ve lost out on a couple of deals we were chasing as competition increased.\u201d<\/p>\n\n\n\n

It may be too early to say the same for conventional office properties, but the proverbial investment freeze is quickly thawing, suggested Brog. Due to the uptick in buyers, though, he\u2019s unsure of how many deep-value opportunities are available.<\/p>\n\n\n\n

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Read the August 2025 issue of CPE.<\/a><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

These deals require creativity, stamina and nerves of steel.<\/p>\n","protected":false},"author":890,"featured_media":1004765986,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[1521,21808,21783,23891,21747,51037],"tags":[52640,35877,52641,37712,52595,36147],"class_list":["post-1004765966","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-digital","category-featured","category-investment","category-national","category-office","category-trends","tag-brog-properties","tag-granite-properties","tag-midloch-investment-partners","tag-mlg-capital","tag-msci","tag-pwc"],"acf":[],"yoast_head":"\nWorth the Risk: Value Investors Chase Office Deals - Commercial Property Executive<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.commercialsearch.com\/news\/worth-the-risk-value-investors-chase-office-deals\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Worth the Risk: Value Investors Chase Office Deals\" \/>\n<meta property=\"og:description\" content=\"These deals require creativity, stamina and nerves of steel.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.commercialsearch.com\/news\/worth-the-risk-value-investors-chase-office-deals\/\" \/>\n<meta property=\"og:site_name\" content=\"Commercial Property Executive\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/CPExecutive\" \/>\n<meta property=\"article:published_time\" content=\"2025-07-30T20:13:58+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2025-07-31T13:13:08+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2025\/07\/LaSalle_Plaza_interior-featured.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1200\" \/>\n\t<meta property=\"og:image:height\" content=\"900\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Joe Gose\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@cpexecutive\" \/>\n<meta name=\"twitter:site\" content=\"@cpexecutive\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.commercialsearch.com\/news\/worth-the-risk-value-investors-chase-office-deals\/\",\"url\":\"https:\/\/www.commercialsearch.com\/news\/worth-the-risk-value-investors-chase-office-deals\/\",\"name\":\"Worth the Risk: Value Investors Chase Office Deals - Commercial Property Executive\",\"isPartOf\":{\"@id\":\"https:\/\/www.commercialsearch.com\/news\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/www.commercialsearch.com\/news\/worth-the-risk-value-investors-chase-office-deals\/#primaryimage\"},\"image\":{\"@id\":\"https:\/\/www.commercialsearch.com\/news\/worth-the-risk-value-investors-chase-office-deals\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2025\/07\/LaSalle_Plaza_interior-featured.jpg\",\"datePublished\":\"2025-07-30T20:13:58+00:00\",\"dateModified\":\"2025-07-31T13:13:08+00:00\",\"author\":{\"@id\":\"https:\/\/www.commercialsearch.com\/news\/#\/schema\/person\/c65d4944b0b506742e79b5b1b9ecca26\"},\"breadcrumb\":{\"@id\":\"https:\/\/www.commercialsearch.com\/news\/worth-the-risk-value-investors-chase-office-deals\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.commercialsearch.com\/news\/worth-the-risk-value-investors-chase-office-deals\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.commercialsearch.com\/news\/worth-the-risk-value-investors-chase-office-deals\/#primaryimage\",\"url\":\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2025\/07\/LaSalle_Plaza_interior-featured.jpg\",\"contentUrl\":\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2025\/07\/LaSalle_Plaza_interior-featured.jpg\",\"width\":1200,\"height\":900,\"caption\":\"Investment. 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