The commercial office market’s ongoing challenges have created what some investors see as a rare opportunity. While headlines often promote office-to-apartment conversions as the answer to high vacancy rates, the situation is more complex, something Seattle-based Tourbineau Real Estate Partners is addressing with a distinctive approach.
Founded in late 2023 by Benjamin Wong and Jonas Sylvester, former colleagues at Unico Properties, Tourbineau has acquired seven distressed office properties nationwide, with two more under contract by year-end. Their strategy is to purchase deeply discounted office and commercial buildings, allowing for multiple viable exit strategies, including conversions to self-storage, multifamily, or hospitality uses.
“We buy buildings at such a price that they could conceivably stay as office or go in almost a whole different direction if we redevelop into something else,” Wong says. This flexibility comes from acquiring assets at a cost where “they don’t necessarily have to be converted.”
Wong’s investment thesis draws on over a decade at Unico Properties, where he observed a fundamental change in office demand. The concept he refers to as the “perpetual demand curve”—the belief that office space would always attract tenants if priced low enough—has been permanently altered.
“There are right now Class B and Class C assets in core areas in urban, dense cities that if you gave away the space, no one would want it. That was never the case,” Wong notes. “There was always a perception that if you make it cheap enough, someone will fill it. That is no longer the case.”
This represents more than a cyclical downturn. Wong argues that traditional capitalization rate models, which assume steady demand, are no longer valid for much of the office sector. As a result, large portions of office inventory now face uncertain futures, creating the distressed acquisition opportunities Tourbineau pursues.
Although some markets show early signs of leasing recovery, Wong believes the industry remains in the early to middle stages of the distress cycle. The timing is tied to loan origination patterns from 2017 to 2019, when many office properties secured three-to-five-year financing.
“Lenders were very accommodating in 2022, 2023, and 2024 because they didn’t want their entire book awash with issues,” Wong says. “That time has now passed. Lenders are starting to get much more aggressive in getting this off their books.”
Instead of formal foreclosures, which would add properties to lenders’ balance sheets, Wong sees more “lender-facilitated sales,” where financial institutions compel borrowers to sell and help facilitate the transaction. “The majority of our purchases” have followed this model, he says.
Contrary to the widespread narrative of office-to-apartment conversions, Tourbineau’s portfolio is oriented more toward self-storage. Of their nine projects by year-end, most will be converted to self-storage rather than residential units.
“The common theme that all these buildings will become apartments—that is generally not the case. It is something that looks good on a headline, but that’s generally not accurate,” Wong says.
Self-storage conversions offer distinct advantages: they require minimal structural changes, involve lower capital expenditures, and provide what Wong considers “perpetual” demand. Unlike apartment conversions, which typically demand extensive modifications to building systems, self-storage is “one of the least impactful uses” for existing office structures.
“There are a lot of properties where, if you wanted to turn them into apartments, it would involve a substantial amount of disturbance and capital, almost to the point where it might be better to just demolish the building,” Wong explains.
Tourbineau operates nationally but prioritizes urban properties for practical reasons that extend beyond market trends. Urban assets often require cooperation with local governments for zoning and permits, and municipalities have stronger incentives to find solutions for prominent downtown buildings.
“The closer you are to an urban area, the more likely you are to get someone’s attention, because it becomes a more economically important question for them to solve,” Wong says. Cities that previously valued these properties highly for tax purposes are motivated to see them return to productive use.
Despite the opportunities in distressed office conversions, Tourbineau faces relatively little competition, particularly from institutional investors. Wong attributes this to the risk-averse approach of institutional capital and a recent emphasis on private credit investing.
“Most institutions were on the sidelines and were playing in the private credit realm,” Wong observes. Many believed that “on a risk-adjusted basis, it’s actually more profitable to be in the lender pool, not the equity” side of distressed office investments.
This has created favorable conditions for Tourbineau, with Wong recalling situations where they were “the only bid” on properties. The absence of competition enables them to “dictate not just pricing level, but terms of how long we need” for due diligence and execution.
Tourbineau’s investor base is primarily family offices and private capital, rather than only institutional sources. This capital structure aligns with their strategy, as Wong explains: “Private capital tends not to have a finite life, versus institutional capital. For plays like this, if you’re not constrained by time, at some point, you’re going to do quite well.”
This patient capital approach is crucial for conversion projects, which often require extended periods for permitting, construction, and lease-up.
Looking ahead, Wong expects Tourbineau’s strategy may change considerably by 2027. If office markets recover or interest rates decline, the firm might shift from conversions to opportunistic office acquisitions.
“If there’s actually an office market rebound, or system-wide interest rates are lower, I could see office assets appreciating to a point where it doesn’t make sense for us,” Wong says. In that case, “we could start buying office assets because they’re just cheap and keeping them as opportunistic office projects.”
This adaptability is central to Tourbineau’s approach. Rather than committing to a single asset class or strategy, they aim to capitalize on market dislocations as they arise. As Wong puts it, “We have already started priming our investors that this isn’t a forever business plan.”
The complexities of office conversions are not lost on Wong and his team. Each building presents unique challenges, from zoning and permitting to construction logistics and market demand. Self-storage, while less complex than residential conversion, still requires careful planning and execution to create a viable project.
Tourbineau’s focus on buying at a low enough basis provides a buffer against unforeseen costs or delays. By maintaining multiple potential exit strategies, they reduce the risk associated with any single outcome.
The office market’s distress is driven by structural shifts in how companies use space. Remote and hybrid work models have reduced the need for traditional office footprints, particularly for Class B and C properties in urban cores. This has led to a growing inventory of underutilized buildings with uncertain futures.
Tourbineau’s approach is to selectively acquire properties where the price allows for flexibility—whether keeping the asset as office, converting to self-storage, or pursuing another use. This strategy requires in-depth market knowledge, disciplined underwriting, and the ability to execute across a range of asset types.
Municipalities, too, play a role in shaping outcomes. Cities with proactive policies and streamlined approval processes can help accelerate the return of distressed properties to productive use. For Tourbineau, working closely with local governments is often a key part of the conversion process.
For investors, Tourbineau’s strategy offers exposure to a segment of the real estate market with significant upside potential but also considerable complexity. The willingness to pursue nontraditional conversions and the patience to wait for the right market conditions are essential components of their model.
Tourbineau’s reliance on private capital provides the flexibility needed for these longer-term, uncertain projects. The absence of institutional constraints allows the firm to hold assets through extended development cycles and adapt as market conditions shift.
As the office distress cycle continues, opportunities will likely evolve. Some markets may see a rebound in office demand, while others could experience further declines. Tourbineau’s ability to pivot—whether toward self-storage, multifamily, hospitality, or a return to office—positions the firm to respond effectively to changing conditions.
The key, Wong emphasizes, is not just identifying distressed assets but maintaining the strategic flexibility to adapt as the market changes. With a focus on acquiring properties at favorable prices and a willingness to explore multiple end uses, Tourbineau Real Estate Partners aims to navigate the complexities of the current office market and capitalize on opportunities as they emerge.
Explore similar articles from Our Team of Experts.
The real estate development industry has undergone significant changes over the past four decades, from the rapid growth of suburban retail in the 1980s to the rise of urban adaptive reuse a...
The hotel transaction market has endured one of the most dramatic interest rate increases in recent memory. Still, industry veterans now see signs of stabilization as buyers and sellers adju...
