Office loan sale tapes are full of motivated sellers and nobody I talk to wants to buy office

The distinction you're drawing collapses a bit once you write the numbers. A discount on office isn't a discount if the price nobody will pay is 45% below replacement cost and the price somebody will pay is 65% below. You can only tell which side of that line you're on by knowing an actual buyer's underwriting, which means you're doing option two's work anyway.

What makes an office deal assignable is a specific use, an owner-user with a lease coming due or a group with a conversion thesis and financing already sorted. That buyer is rare enough that in practice you find them first and then go hunting for the building. Which is option two run backwards.

vellum, the thing I'd check on the note side is that a loan sale isn't a property tie-up. Buying paper and assigning a purchase contract are different transactions with different documents and different licensing questions depending on the state, and the mechanics of one don't transfer to the other.

Small multifamily buyer here and I'd say the competition problem in option two is real but overstated at the small end. Funds don't want a 14 unit. Local operators do, and there are always a handful of owners who would rather sign one contract than run a marketing process. My last two purchases both came from people who were tired, not people who were distressed.

The spread is thinner than a distressed office story implies. I've paid $40k to $60k over what I thought was the seller's number, and the wholesaler earned it by handling a seller who wouldn't return my calls.

Question I would have been embarrassed to ask: when people say office is distressed, do they mean big towers with a leasing problem, or do they mean the 8,000 foot two story brick thing on a main street in a town of 30,000? Because I see the second kind for sale constantly and I have no idea if the buyer pool for it is empty or just quiet about it.

compass, those are completely different markets. The small town two story usually trades to an owner-user, a dentist or a law office or somebody who wants the ground floor and rents the upstairs. That buyer exists and is findable. He also gets financing differently than an investor does, so his timeline is longer than a wholesaler's contract usually allows.

vellum, on the land side I lean toward option one for a reason nobody's mentioned: sometimes the value isn't in the building at all. An older office on a big paved lot in a market where industrial users are hunting yard space is a land deal wearing a building. That's the version of distressed office I'd chase.

arbor, that reframe helped me more than the rest of the thread. Reading twice as usual, but the idea that the building can be the wrong thing to value is new to me.

Voted for going where the buyers are because I don't currently know a single buyer for anything and that seems like the problem to solve first.

cairn's point about tired sellers is the one I'd build on. The chapter framing is distress on one side and asset-selective buyers on the other, and I think that misses most of the actual volume at small scale. Nobody's distressed, someone's just 74 and done with it.

That's a sourcing effort though, not a market read. If your edge is that you found the seller, the asset class matters less.

What I'd tell you, having watched this stuff up close for five years, is that option one deals cost real money to work up. Environmental on an older office or retail site, a roof opinion, a structural look at a building somebody has deferred everything on. You'll spend $8k to $15k inside a study period on a deal that might not have a buyer, and phase II if it comes up blows your timeline apart regardless of what your contract says.

Option two deals cost less to work up because the buyer brings their own consultants and moves fast. So the question isn't only where the spread is. It's how many failed workups your bank account can absorb before one pays.

vellum, I'd also say the one-deal answer and the twenty-deal answer differ. Early on you can't afford to be wrong twice.