Acquisitions
Office Building Due Diligence: What Today's Buyers Actually Verify
Office is the most disputed asset class in commercial real estate right now. Here is how a disciplined acquirer separates the office buildings worth owning from the ones that look cheap for a reason.
The Reset in Office Underwriting
Office underwriting has changed permanently. Hybrid work, sublease overhang in major markets, and rising tenant improvement costs mean the historical assumptions about renewal probability, downtime, and capital cost no longer apply. A 90% historical renewal probability is now closer to 60 to 70% in many markets.
The buildings that work are the ones with specific demand drivers: medical office near hospitals, professional office near courts and financial centers, owner-occupier candidates, or flex and creative space in walkable submarkets. Commodity suburban office without a demand driver is the hardest category to underwrite.
Lease Audits Beat Pro Formas
We abstract every lease ourselves: base rent, escalation, reimbursement structure, options to extend, contraction rights, free rent remaining, unfunded TI commitments, parking rights, and signage. The abstracts almost always reveal something the rent roll did not. Unfunded TI obligations are the most common surprise.
Estoppels from tenants are non-negotiable. We have walked from deals because tenants would not estop key lease terms, a strong signal that the seller's lease summary is not what the tenant believes is in force.
Capital Needs: The Real Cost of Re-Leasing
Re-leasing office space in today's market requires significant capital. Tenant improvement allowances of $40 to $80 per square foot for second-generation space, $80 to $150 per square foot for first-generation or repositioned space, plus 6 to 10 months of free rent and 4 to 6% leasing commissions.
These costs have to be modeled into the acquisition, not waved off into capex. A property with 30% rolling vacancy over the next three years has a multi-million-dollar capital obligation that directly reduces what the buyer can pay.
Building Systems and Sustainability
Modern tenants ask about HVAC controls, air filtration, after-hours access, EV charging, and energy efficiency. Buildings that cannot answer those questions credibly lose out on the tenants paying market rent.
We assess HVAC age and remaining useful life, elevator capacity and modernization history, building automation systems, and any deferred maintenance on facade and roof. Each item gets a line in the capital plan.
Submarket Selection and Tenant Demand
We focus on submarkets with embedded tenant demand: medical office near hospital systems, professional office near county and federal courts, and flex office in employment corridors with daytime population. Submarkets without a demand engine require a much steeper discount to clear our underwriting.
South Florida has multiple submarkets that still work for office acquisition. The discipline is in knowing which buildings, in which submarkets, at which basis.
Where We Are Buying Today
Price Capital Group actively pursues office building opportunities in South Florida where the basis, the in-place tenancy, and the capital plan align. We are selective, but selective is not the same as inactive.
If you own an office building considering a sale, recapitalization, or joint venture, our acquisitions team will give it a clear-eyed read.
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