'The Risks Have Changed': Why Brookfield Is Selling Its D.C.-Area Office Properties

Brookfield paid $150M for a Bethesda office tower in 2011. 

Last month, it sold for $20M.

That sale is one of the latest steps the Canadian investment giant has taken to reduce a footprint it spent two decades building in the nation's capital.

Since the pandemic, Brookfield has shed more than 2M SF of D.C. office space, from 32 properties in 2019 down to 20 today, according to a source familiar with the company’s portfolio. It lost five Montgomery County buildings to foreclosure last fall and cut its local workforce from roughly 100 employees to 30 over the past three years. 

Now, a broker has listed the last undeveloped parcel at The Yards, the 48-acre Navy Yard waterfront district that has been the signature project of Brookfield's D.C. presence since 2018. 

“The risks have changed,” said John Kevill, managing principal of Solitude Cove Capital. “If you entered the market 10 years ago, you have to look at things differently.”

Brookfield says its moves reflect strategy, not distress. 

“Our recent deals reflect disciplined portfolio management and the normal lifecycle of our investments,” a spokesperson said in an email last week. “Over the past several years, we have returned significant capital to investors from much of the portfolio, including through prior recapitalizations.”

Analysts who spoke to Bisnow in recent weeks say the reality is more complicated — deteriorating market conditions and a deliberate push into data centers have together turned one of the city's most prominent institutional landlords into a seller.

Post-pandemic, employers are still rethinking how much office space they need. U.S. office vacancy has been declining since reaching record highs last year, but the rate is expected to stagnate through 2026, according to CoStar data.

Beyond that, the federal workforce shrank by nearly 238,000 workers in 2025, according to a Pew Research Center analysis. About 13% of federal employees are located in D.C. 

The government is also downsizing its own portfolio in the nation’s capital, offloading federal office properties on an accelerated basis. And white-collar workers face growing uncertainty over how artificial intelligence will reshape their jobs.

The combination of pandemic-era office disruption and federal workforce cuts has been particularly acute in D.C.

There’s a “double whammy” in effect in the D.C. market, said David Putro, associate managing director of Morningstar Credit Analytics. “This is just not an attractive market to be in anymore.”

From Coveted To Costly

In 2004, Brookfield Properties Corp. wrote in an annual information form that “Washington D.C. has emerged as one of the most coveted real estate investment markets in the world.” It also said the city had a “stable tenant base, especially in the downtown office market.” 

That year, among other acquisitions, Brookfield bought the 364K SF Edison Place office building in downtown D.C. for $167.1M. In 2025, more than two decades later, it sold that building for $175M. It was a nominal $8M gain, but adjusted for inflation over 21 years, it represents a loss of more than $100M.

In 2018, the firm took ownership of The Yards, a waterfront development in D.C.’s Navy Yard neighborhood, when it purchased Forest City Realty Trust for $11.4B. Six years later, in 2024, Brookfield began to sell buildings there.

At the time, Brookfield Properties Executive Vice President Cy Kouhestani told Bisnow that the company decided to sell because the properties were performing well and its strategy was to dispose of assets for the benefit of its investors. 

This year, in February, Brookfield sold a downtown D.C. glass trophy tower for $163M, a significant discount from the building's pre-pandemic value. In May, Brookfield sold a Bethesda office tower for $20M, 87% less than what it paid in 2011.  

And in June, brokerage firm Berkadia put up for sale Parcel Q, which it calls the “crown jewel” of The Yards. The parcel was originally planned for office. But in May, the National Capital Planning Commission approved a land use designation change to allow residential use. A commission spokesperson said the General Services Administration owns the property and Brookfield controls the rights.

There is plenty of demand and limited new supply, given the high costs of construction, so Brookfield is seeing opportunities to sell and free up capital for other property assets, such as data centers, according to Crispin Love, a director in Piper Sandler’s equity research department.

“I think Brookfield is seeing an opportunity in some places to sell, whether they're at premiums to what they bought them for or lower in some cases, and looking to deploy that capital elsewhere,” Love said.

In November, Brookfield launched a $100B AI infrastructure program with the goal of investing in energy, data centers and compute capacity.

“They're just kind of recycling their capital out of one strategy into another strategy, and I know they're going heavy into digital infrastructure and data centers,” said Zach Wade, president and chief operating officer of MRP Realty.

Kevill said Brookfield “is probably a pretty good example of an owner that invested here in a big way because of the steady returns achieved in the market.” 

But “when it becomes clear that’s no longer the case, it makes sense that they would shift their strategy,” he said.

Not all of Brookfield's exits have been voluntary.

In October, six Montgomery County office properties went to a foreclosure sale, five of which went to the lender. They made up half of a portfolio that a Brookfield fund bought in 2016 and 2017. Brookfield lost another building in the portfolio, in Arlington, in June 2025. A Brookfield spokesperson said at the time that those assets were “immaterial” to its global real estate business. 

A Brookfield spokesperson said this week that the company remains “deeply committed to the region” and continues to “have significant investments across logistics, housing, retail, office, and digital infrastructure.” 

“As business plans are executed, we routinely recycle capital into new opportunities, and as one of the world’s largest real estate investors, we deploy and monetize at scale,” the spokesperson said.

Smaller Players Move In

The value of D.C. office buildings has dropped by as much as half since the pandemic, opening the door for a new class of buyers.

“The world changed as we knew it, especially in D.C. Old buildings that were worth 100 are now worth 40 to 50,” said John Wolf, founder and CEO of FarmViewVentures, a privately held real estate investment firm.

That dynamic has attracted a new breed of investor willing to take on risk the institutions won't.

“Office valuations have plummeted so hard over the past five years or so since Covid that institutional equity does not have the flexibility that private capital, particularly from family offices, has,” said Jackson Siegal, principal at In-Rel Properties. 

“Not only can we buy more quickly, but once we've bought, we can do new leases, more streamlined, with less decision-making and with more flexibility,” he said.

In-Rel paid Brookfield $20M in May for 3 Bethesda Metro Center, a 388K SF, 1980s-era building next to the Metro station. 

Kevill expects the new ownership class to be dominated by smaller or out-of-market investors buying one or two properties at a time rather than large portfolios.

“If you buy a big portfolio, you're concentrating a lot of your risk where that portfolio is, and what I think you're seeing from the market in general is more institutional investors are reticent to concentrate their portfolio in an area where they can't define the risks the same way that they did before,” he said.

Kevill said he expects to see more property-level investment, including improvements to amenities.

Wolf spent more than 18 years at real estate investment giant Westbrook Partners up until 2024. Now, at FarmViewVentures, he has been buying up distressed assets in D.C. at low prices. 

“People who can see through the headline negativity are going to make a lot of money buying stuff from sellers who can't operate and own real estate for various reasons,” Wolf said.

He said he is already putting capital into acquired buildings.

“We're putting in new conference facilities, we're redoing the parking garages, we're redoing roof decks, so we're putting new capital into making the buildings more competitive to attract tenants,” Wolf said.

At 3 Bethesda Metro Center, Siegal said In-Rel plans to do a “facade makeover,” including new architectural features, lighting and paint. He also said it will be adding a spec suite program and an amenity floor to the interior. 

Siegal said he predicts more conversions of Class-B office buildings into Class-A, something that In-Rel is particularly focused on. In-Rel is looking at several assets that are up for sale or will be in the D.C. area in the next three to nine months, he said.

“As nimble smaller operators, we feel that we can outperform and outcompete the larger groups, many of which have assets that are currently in distress,” Siegal said.