According to a recent report by CRED iQ, distressed properties have seen a significant decline in valuations as of midyear 2024. On average, these properties have experienced a decrease of 43% from their original issuance, marking an increase of 140 points since six months ago.
When looking at valuation grouping, it is clear that smaller distressed properties valued at less than $5 million have been hit the hardest with an average decline of 51%. On the other hand, larger properties valued at $100 million or more have still seen a considerable drop in assessments by an average of 37%.
The office sector has taken the biggest hit overall with three out of the top five largest declines occurring within this market. The largest single-property valuation decline was recorded for Midtown Manhattan’s office property located at 1740 Broadway which now has a value of $175 million – down from its previous assessment by $430 million. Overall, distressed office property valuations are down by an alarming rateof53%.
Following closely behind is retail with an average valuation declineof52%. Some notable decreases include Mall de las Aguilas in Eagle Ridge,TXwhich sawa staggering$244.6-million drop and Minnesota’s Mall Of America experiencinga lossinvaluationby$360million- both nowvaluedatjust$10million.
In comparison to other sectors,the hotel industryhasseenanaveragevaluationdeclineof40%foritsdistressedproperties.Multifamilypropertieshave remained relatively stablewithonlya35%decreaseinassessmentswhileindustrialpropertyvaluationsimprovedfromanaverage32%downto10%.
Pictured: Office building located on1740Broadway.Credit:KevinChuandJessicaPaulPhotography.
This post highlights that despite some improvements in certain markets,the overall trend for distressedsitesisstillnegative.Withtheofficeandretailsectorsbeinghitthehardest,itwillbeinterestingto see howtheseindustrieswillrecoverin thecomingyears.
