The first big test of how much a prominent Downtown office tower can fetch on the open market post-pandemic may be at hand.
Liberty Center, the 27-story building that is home to Federated Hermes, is up for sale. It is believed to be the first major Downtown skyscraper to hit the market since the start of the pandemic in 2020.
It also marks the third time in the past 10 years that the building at 1001 Liberty Ave. has been on the market. It was purchased in late December 2016 by Los Angeles-based CBRE Global Investors, now known as CBRE Investment Management.
No price was disclosed at the time, but it was believed to be in the neighborhood of $98 million.
Marketing the office tower for sale this time around is the Jones Lang LaSalle real estate firm. John Pelusi, one of the brokers involved, declined comment, as did Pam Barnett, a CBRE Investment spokeswoman.
According to local real estate sources, the building is being marketed for sale without an asking price.
The listing comes at a time when the market continues to be plagued by high vacancy rates tied to the pandemic and hybrid work models. Vacancies totaled a record high 11 million square feet in the second quarter, the CBRE real estate firm reported. CBRE Investment Management is an independently operated affiliate of CBRE.
In Downtown, the vacancy rate in the second quarter hit 18%, with that for the higher end Class A properties totaling 20.7%, CBRE stated. Of the 2.1 million square feet of sublease space available, nearly 60% of it falls within Downtown submarkets, with big contributors being BNY Mellon Center on Grant Street and EQT Plaza on Liberty Avenue.
In the second quarter alone, BNY Mellon vacated more than 170,000 square feet in its Grant Street office tower as it moves to consolidate operations at 500 Ross St. by 2028.
Despite such woes, Liberty Center has a few things going for it, with about 90% of its nearly 530,000 square feet occupied. Its main tenant is Federated Hermes, with 824 employees spread over 12½ floors. Federated’s lease runs until 2030.
Just what kind of interest Liberty Center gets given current conditions likely will be watched closely by the local real estate community — as well as other potential sellers.
“I think it’s a challenging market even for a well-leased, first-class building like Liberty Center,” said Gerard McLaughlin, executive managing director of the Newmark real estate firm. “It will be a good test of what market values are.”
In some other markets, sellers have struggled to get value for their properties because of high vacancy rates. In San Francisco, for example, a 22-story office tower on California Street estimated to be worth about $300 million in 2019, was expected to sell for about $60 million, according to the Wall Street Journal.
Before CBRE Investment Management bought Liberty Center in 2016, it was owned by Greenwich, Conn.-based Starwood Capital Group, which paid $135 million for it in August 2013.
However, the deal included the adjacent Westin Convention Center Hotel. The hotel was not part of the CBRE Investment purchase, nor is it part of what’s currently up for sale.
Liberty Center is testing the waters even as some others have held off despite an intent to sell.
Last year, Raleigh N.C.-based Highwoods Properties announced that it planned to sell off its Pittsburgh assets — including the iconic six-building PPG Place complex near Market Square and the 32-story EQT Plaza on Liberty Avenue — to help fund its entry into the Dallas market.
It even tapped Eastdil Secured, a global real estate investment bank, and JLL to market the real estate. But it has yet to formally put either of the properties up for sale.
Other potential sellers also have been cautious, waiting to see how the office market settles as the pandemic wanes.
Mark Belko: mbelko@post-gazette.com
First Published: July 13, 2023, 9:30 a.m.
Updated: July 13, 2023, 8:48 p.m.
