The US office crisis creates a generational opportunity for investors
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The combined impact of the work-from-home culture triggered by Covid and has since engulfed the corporate world, overlaid with high inflation and interest rates, has put significant pressure on the US office real estate environment.
According to Fortune magazine, US office vacancy rates had broken through the 20% level for the first time in history by early July. This follows a 70% leap in the number of Chapter 11 bankruptcy filings in the first six months of 2024 to 987 commercial companies from 582 in the first half of 2023, based on figures provided by data provider Epic AACER.
This crisis has created a once-in-a-generation opportunity, as banks and large REITs are offloading distressed buildings for dimes in the dollar. That creates a gap for operators and developers who understand the space to pick up buildings for less than the price of the ground so they can repurpose or rehabilitate them.
OrbVest, specialists in US medical real estate, have joined forces with two significant Florida operators who have been specialising in opportunistic acquisitions for over a decade to provide OrbVest investors with more exciting returns in the value-added space.
"Over the past year, we have been consolidating all our syndicated healthcare buildings into one listed holding entity, AccretivPLUS Healthcare Portfolio Limited, to give our investors a robust product with more diversification and stable blended returns that we distribute quarterly," says Justin Clarke, COO of the group.
"But we could not ignore this unbelievable generational opportunity. Our larger investors have been pushing us to take advantage of these disruptive market conditions, and we are now on our second offering in the distressed office space."
The company has just secured two eleven-story tower blocks of 300,000 sq./ft (~30,000 sqm) and 13 acres of land at an extraordinarily low price of only $40 per square foot in San Antonio, Texas. The entire land area and towers are being acquired free of debt through a partnership with a top-10 US bank, which has agreed to reinvest $9,000,000 of the purchase price as preferred equity.
OrbVest plans to convert a portion of the vacant office space to 231 micro-housing units (multi-family accommodation) in one of the fastest-growing cities in America. The sponsor and development team have existing conversion projects converting office space to residential space in San Antonio and have the resources on the ground to move quickly.
While the US has been plagued by office vacancies, it is also experiencing an acute shortage of affordable housing. Moody's Analytics estimates a total deficit of between 1.5 and 2 million units due to high construction costs and interest rates. This should give investors confidence that there is significant demand for the multi-family product resulting from these conversions.
If you would like more information on the US office environment and the generational opportunity it provides, join BizNews' Alec Hogg on July 18th at 2pm as he meets with OrbVest's Martin Freeman and Justin Clarke. Register by clicking here.
For more information on the investment opportunity, click here.
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