Cheap secondary office keeps not being cheap enough

The carry difference is the whole thing for me. On land my worst year is a tax bill and maybe mowing. On your building the worst year is $295k of operating expenses on empty space plus whatever the roof decides to do, and none of that is optional.

What I'd want to see before I got anywhere near it is a downtime schedule rather than a stabilized pro forma. If the 31,000 sf leases at 4,000 sf a year, that's roughly eight years of paying to own vacancy while spending $60/sf each time you win. What does the offering assume for absorption? Anything under three years in a submarket with 19 percent vacancy is somebody's hope.

Different end of the same market. In the towns I look at, office is a 6,000 sf single-story on Main Street at $35 to $45/sf, and the tenants are an insurance agency, a surveyor, a small title office. Nobody's asking for a wellness room or a $70/sf fitout, they want the carpet replaced and the parking plowed. Leases are three years and renewals are a handshake and a rent bump.

It's not scalable and the rent is $12 gross, but the TI arms race Orchard is describing doesn't really reach there.

What's the current weighted average lease term on the leased 54 percent? If that's under three years you're buying the vacancy twice.

I've been looking at obsolete office purely as a land and shell play and the geometry is where it dies. Residential wants a unit within about 28 to 30 feet of a window. Your 1987 suburban floorplate is probably 22,000 sf per floor with a deep core, so the middle of the plate has no legal use in a residential conversion and you're paying taxes on square footage that can never be an apartment.

The conversions that pencil tend to be narrow older towers with 12,000 sf plates and a window line everywhere. Suburban slabs mostly get demolished or stay office. Worth pulling the actual as-built plans before anyone at the table says the word conversion, Orchard.

One thing that broke on me in a smaller way with a mixed-use building: the assessor lags. If that 68,000 sf asset is still assessed off a 2019 stabilized value, your $9.50/sf expense load is understated and the appeal takes two cycles to land. Orchard, ask for the last three years of tax bills and the assessed value trend rather than the pro forma tax line. Sellers pro forma the appeal as if it's already won.

I read this whole thread hoping someone would find the version that works and instead I'm further from it than when I started. If prime is the part that's actually recovering and prime is priced like prime, then the boring answer for someone like me is exposure through something liquid and small, or nothing. Sitting on a half-empty 1987 slab and writing $300k leasing checks is a job, and a hard one.