On Tuesday, we asked: Is this the start of a commercial real estate firesale in crime-ridden Baltimore City?
And to our surprise, it appears so.
Let's begin with our report on Tuesday when The Baltimore Sun revealed a 30-story office tower at One South Street in downtown Baltimore that was sold in June for $24 million, a 63.6% discount versus the tower's 2015 sale of $66 million. This was the first sale of its kind in the post-pandemic era.
One South Street
And one day later, a new report surfaced via the Baltimore Business Journal that indicated another office tower had been panic dumped at a 69% discount.
1 E. Pratt St. has sold for $55.1 million less than it last traded for — marking the second office tower in Baltimore's central business district to change hands this summer at a steep discount as the troubled local office market resets.
MCB Real Estate shelled out $25 million for the 10-story office and retail development at Pratt and Light streets, according to three sources familiar with the transaction that is not yet recorded in state property records. The tower last sold in March 2018 to a subsidiary of Banyan Street Capital for $80.1 million, records show. -Baltimore Business Journal
1 E. Pratt St.
The occurrence of two firesales this summer clearly indicates that the commercial real estate market in the downtown area is experiencing a massive reset, if not a crash, in prices.
None of this should surprise readers because we've already penned a note titled "Entire Downtown Is Effectively Dead:" Baltimore City Descends Further Into Turmoil.
Terri Harrington, a commercial real estate broker, told The Sun to expect more firesales:
"I also believe you are going to see other buildings in the same boat."
Occupancy drives building values, and many towers in the downtown area are struggling to maintain tenants. The CRE collapse in the metro area is not entirely due to remote or hybrid work trends. Instead, at least one financial firm tells us they're actively searching for space outside the city because Democrats have failed to maintain law and order.
Let's not forget the CRE mess is a nationwide issue in major US cities.
1/3— Jim Bianco (@biancoresearch) July 18, 2023
This week's cover pic.twitter.com/AukIEh85wC