Distressed office sales in Chicago, Denver, and Washington DC show 90% discounts from peak. What the sales mean for assessment appeals and property valuations.

Three recent office sales in major markets have revealed the depth of the office market correction. In Chicago, a downtown office tower sold for $30 per square foot, down from a peak of $300 per square foot—a 90% discount. In Denver, a suburban office park sold for $25 per square foot, down from a peak of $250 per square foot—a 90% discount. In Washington DC, a K Street office building sold for $40 per square foot, down from a peak of $400 per square foot—a 90% discount.

The sales

The Chicago sale was 111 West Wacker Drive, a 45-story office tower in the Loop. The building was 60% vacant at the time of sale, and the buyer was a distressed asset investor who plans to convert the building to mixed-use. The Denver sale was the Denver Tech Center Office Park, a three-building campus in the Denver suburbs. The campus was 70% vacant at the time of sale, and the buyer plans to repurpose the buildings for life sciences use. The Washington DC sale was 1999 K Street, a 12-story office building on K Street NW. The building was 50% vacant at the time of sale, and the buyer plans to convert the building to residential.

All three sales were distressed sales, meaning the sellers were under pressure to sell due to maturing debt or financial distress. The buyers were all specialized investors who focus on distressed assets and have the capacity to hold properties through long repositioning processes.

The assessment implications

The sales have significant implications for property assessments. In all three markets, assessors have been slow to reduce assessed values to reflect market reality. The Chicago tower was assessed at $200 per square foot at the time of the $30 per square foot sale. The Denver campus was assessed at $180 per square foot at the time of the $25 per square foot sale. The Washington DC building was assessed at $300 per square foot at the time of the $40 per square foot sale.

The gap between assessed values and sale values creates an opportunity for assessment appeals. Property owners in all three markets are filing appeals based on the recent sales, arguing that their assessments should be reduced to reflect current market conditions. The appeals are likely to succeed, as assessors generally must consider recent comparable sales when setting assessments.

The district impact

The assessment appeals will have significant impact on special districts that rely on property tax revenue. Districts in Chicago, Denver, and Washington DC are likely to see assessment revenue decline as appeals are processed. The decline could be substantial—if assessments are reduced by 80% to match the sales, district revenue could decline by a similar percentage.

Districts are already planning for revenue declines. Some districts are reducing programming budgets. Some districts are drawing on reserves. Some districts are exploring alternative revenue sources, such as sales taxes or tourism taxes. All districts are facing the reality that the office market correction is not temporary—it is a structural shift that will permanently reduce assessment revenue.

The valuation lesson

The 90% sales teach a lesson about property valuation in a post-pandemic market. The traditional valuation models that assumed office values would recover to pre-pandemic levels are no longer valid. Remote work is a permanent shift, and office demand has permanently declined. The new valuation models must account for this permanent demand reduction.

The lesson for districts is that assessment revenue declines are likely to be permanent. Districts cannot wait for office markets to recover—they must restructure their budgets and revenue models to reflect the new reality. The districts that adapt quickly will be the districts that survive and thrive in the new environment.