Wong said the last large downtown sale was in 2021 when Oxford sold RBC Plaza in Toronto to billionaire and Zara retail clothing chain owner Amancio Ortega for $1.2 billion, a transaction that closed in early 2022. Since that deal was struck, valuations for office real estate in the public markets through real estate investment trusts have slid and are now 50 to 60 per cent lower than pre-pandemic levels.
“I would expect that as sellers they want a fulsome price, but … there are few barometers of what the valuation should be and what potential buyer expectations are for this type of product these days,” he said.Gomez told the Financial Post in April that he is expecting a reckoning in private market valuations since remote work has proved to be a lasting trend rather than a short-term pandemic-driven event, a view he still holds.
“Better to sell your best in this environment than sell your worst and face added scrutiny,” he said. In the nine cities studied including New York, San Francisco, London and Tokyo, US$800 billion in value is at stake by 2030 in a moderate scenario in which the total value of office space declines by 26 per cent from between 2019 and 2030. In a more severe scenario modelled by the consultancy, the value of office space plummets by 42 per cent.
Elizabeth Bell, a principal specializing in real assets investment at private market fund manager Hamilton Lane, reached a similar conclusion in a June 7 report that said there is variance based on the individual property type within the office sub-sector, with Class-A office buildings continuing to hold up “much better than the dislocation we have seen in traditional commodity office.”