The mismatch between funding needs and available credit in a high-interest-rate environment has also intensified the strain on building owners, as elevated tower vacancy rates persist across many markets due to the ongoing trend of remote work becoming the norm. 

Bloomberg penned a CRE note on aging business districts from Los Angeles to Chicago to Boston of zombie towers with high vacancy rates that have no use in today's economy. 

Big landlords, including Brookfield, Blackstone, and Starwood Capital Group, have walked away from older downtown towers in recent quarters.

The latest data from MSCI shows office values in metro areas have crashed 52% from their highs. Some of the worst declines have occurred in San Francisco, Manhattan, Washington, and Boston.

Between 2019 and 2023, about $557 billion of value evaporated from US offices due to a multi-year slide in demand, with older towers quickly falling out of favor with companies, according to an estimate by economists at Columbia and New York universities. CBRE Group noted that only 2% of towers in the US are considered top-tier, with rents 84% higher than the rest of the market. 

Data from brokerage Savills shows office rents in business districts have grown slower than rents for similar buildings outside metro areas. 

The move to new towers highlights how, for decades, the bubbles in legacy downtown districts, fueling economies, have ended for now, and older towers will have to be torn down.

According to Ruth Colp-Haber, chief executive officer of Wharton Property Advisors, a New York brokerage, landlords of old towers are falling under severe pressure because finding financing in today's high-rate environment for renovations is extremely tough.

"What we have left are older buildings, many in AAA locations, but facing a tsunami of trouble," she said, adding, "It used to be there was plenty of business to go around. Now it's a zero-sum game."

X user Triple Net Investor provided color on an office tower in crime-ridden Baltimore City that sold at auction for only $4.4 million. The tower was built in the 1960s in a business district that has seen tower prices collapse over the last several years.