From $68M to $4M: Office buildings are being dumped at massive 90% losses. Is this a once-in-a-lifetime opportunity or a warning for investors?

A distressed property is real estate that’s come under financial strain due to foreclosure, bankruptcy, unpaid taxes or is in poor physical condition, which in turn leads to its pricing below market value (2).

Even government-leased buildings aren’t immune. Buyers recently snapped up a nearly 1-million-square-foot federal government–linked property for a fraction of its previous value (3).

And while those discounts may look like a once-in-a-lifetime opportunity, they’re also raising a big question: Is this the moment to buy in or a warning sign to look elsewhere?

The scale of the decline is hard to ignore. Across the U.S., landlords and lenders are eating losses after years of holding out for a post-pandemic recovery that never fully materialized.

A rare buying opportunity for the risky

Not every building is selling for pennies on the dollar.

Office spaces in top-tier locations are still holding their value, for the most part. But across much of the market, prices have plummeted, with even high-quality properties down roughly 35% from their peak, according to Green Street data (4).

For the risky investors, this creates a window of opportunity.

Investors are picking up distressed properties at very low prices, and the low costs justify ambitious redevelopment projects, ranging from converting outdated office towers into apartments to reimagining them as entirely new spaces.

That means more than 90,000 apartment units are currently in the pipeline from those office converters nationwide, and that figure continues to climb.

These opportunities come with risk and complexity. High renovation costs, uncertain demand and financing challenges. Even something as simple as location can kill a project before it even has wings, meaning even these highly discounted investments could be wasted (5).

They’re far from guaranteed wins.

Not everyone rushes in

Deep-pocketed investors may be able to scoop up those discounted properties and eat the losses, but others take a more cautious approach. Or, they look beyond real estate altogether.

The reality is that the forces driving the office market’s decline haven’t fully played out yet.

And for investors, that raises another question. Or can you get real estate exposure without taking on the risk of distressed assets?

A less risky way to invest in real estate

You can tap into this market by investing in shares of vacation homes or rental properties through Arrived.

Backed by world-class investors, including Jeff Bezos, Arrived allows you to invest in shares of vacation and rental properties, earning a passive income stream without the extra work that comes with being a landlord of your own rental property.

To get started, simply browse their selection of vetted properties, each chosen for its potential for appreciation and income generation. Once you choose a property, you can start investing with as little as $100 and potentially earn monthly dividends.

Once you’re an investor with Arrived, you’ll gain access to their newly launched quarterly secondary market, where investors can buy and sell shares of individual rental and vacation rental properties directly on the platform.

This allows you to buy into properties you may have missed at the initial offering or sell shares before a property reaches the end of its hold period.

With access to more than 400 properties in 60 cities, this new way to trade real estate offers greater flexibility and opportunities to gain access to more properties each quarter.

For investors ready to take a bigger swing

If diversifying into multifamily and industrial rentals appeals to you, you could consider investing with Lightstone DIRECT, a new investing platform from the Lightstone Group, one of the largest private real estate companies in the country, with over 25,000 multifamily units in its portfolio.

Since they eliminate intermediaries — brokers and crowdfunding middlemen — accredited investors with a minimum investment of $100,000 can gain direct access to institutional-quality multifamily opportunities. This streamlined model can help reduce fees while enhancing transparency and control.

And with Lightstone DIRECT, you invest in single-asset multifamily deals alongside Lightstone — a true partner — as Lightstone puts at least 20% of its own capital into every offering. All of Lightstone’s investment opportunities undergo a rigorous, multi-stage review before being approved by Lightstone’s Principals, including Founder David Lichtenstein.

How it works is simple: Just sign up with your email, and you can schedule a call with a capital formation expert to assess your investment opportunities. From here, all you have to do is verify your details to begin investing.

Founded in 1986, Lightstone has a proven track record of delivering strong risk-adjusted returns across market cycles with a 27.6% historical net IRR and 2.54x historical net equity multiple on realized investments since 2004. All told, Lightstone has $12 billion in assets under management — including in industrial and commercial real estate.

As such, even if multifamily rentals don’t appeal to you, Lightstone could still serve you well as an investment vehicle for other real estate verticals.

Get started today with Lightstone DIRECT and invest alongside experienced professionals with skin in the game.

But even with experienced firms navigating the space, the outlook for office real estate is uncertain.

A fine alternative

Hybrid work, elevated borrowing costs and evolving workplace trends continue to weigh on the sector. That makes it difficult to predict when, if ever, values will fully recover. That uncertainty is reason enough to consider other options.

For example, AI has helped enhance productivity while team sizes remain small or shrink. This allows companies to “right-size” their footprints, trading out their offices for more efficient ones or forgoing the office altogether (6).

That’s why some investors are looking beyond real estate entirely and toward assets that don’t move in lockstep with traditional markets.

Billionaires have long carved out a slice of their portfolios in an asset class with low correlation to the market and strong rebound potential: post-war and contemporary art.

It may sound surprising, but more than 70,000 investors have followed suit since 2019 — through Masterworks. Now you can own fractional shares of works by Banksy, Basquiat, Picasso, and more.

Masterworks has sold 27 artworks so far, yielding net annualized returns like 14.6%, 17.6%, and 17.8%.*

Moneywise readers can get priority access to diversify with art: Skip the waitlist here.