As some office investors dig through the carnage, Sean Bannon is seeking bargains elsewhere: the nation’s liveliest neighborhoods.
The head of U.S. real estate for Swiss insurer Zurich in recent months has scooped up boutique office buildings in the Denver, Boston and Chicago markets for about $125 million combined, with plans to seek out more deals in 2026.
As an institutional investor focused on so-called core real estate, Zurich isn’t interested in buying distressed debt on skyscrapers. By focusing on well-leased buildings in the most desirable pockets of cities, Bannon said, relatively high price-per-square-foot deals struck today still could look good later as overall values in the sector recover.
“We’re starting to see more and more value in the office space,” Bannon told CoStar News. “The last three deals that we’ve done have been in the office space, where you can buy in really good micro-markets. There are winning nodes and losing nodes within cities.”
Bannon is moving forward with the hyperlocal strategy as office sales pick up in the United States. As of October, the trailing 12-month period saw an increase of about 57% in office investment activity from the same period last year, according to CoStar data.
"The acceleration was not just evident in sales volume. The number of office deals that traded were also up double digits above last year's pace," CoStar said in a report. "Even as fundamentals remain in flux, investors are monitoring a potential sea change in leasing demand ... just as the national vacancy rate reaches its projected peak."
While Zurich will continue to invest in U.S. retail, industrial and multifamily properties, Bannon said he expects to continue deploying dollars into smaller office buildings with creditworthy tenants.
In one such deal, Zurich Alternative Asset Management paid $55 million for the approximately 49,000-square-foot building at 58 Charles St. in Cambridge, Massachusetts, in September, according to CoStar data. That building is the headquarters of GE Vernova, the GE energy-business spinoff.
In late October, the Zurich real estate investment arm paid $52 million for the Citadel building in Denver’s Cherry Creek neighborhood. Tenants in the 131,000-square-foot structure at 3200 Cherry Creek South Drive include Wells Fargo Advisors, financial consultant Oppenheimer & Co. and construction firm Tract.
Most recently, a Zurich fund paid just over $18 million in late November for an approximately 32,000-square-foot building at 1020 W. Randolph St. in Chicago’s Fulton Market. The primary tenant there is entertainment-industry behemoth Live Nation.
The three neighborhoods have outperformed their broader office markets.
“The headline vacancy numbers, you can focus on that if you want,” Bannon said. “The discerning investor is looking past Class A, Class B, Class C — old-school metrics — and looking at deciles of asset classes. What you’re going to find in the very poorly performing deciles is obsolescence, and what you’re going to find in top deciles is a highly performing market.”