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Upsurge in Office Property Sales Spreads

New York and Washington, DC, have each posted about $2 billion so far in office sales volume in the first quarter.
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Office investment remains robust, with more markets and more property types showing improvements, according to CoStar Advisor’s Mark Heschmeyer.

Preliminary data for the first quarter of 2011 show office property sales have come in strong. However, not all markets and property classes are benefiting equally -- top-quality assets in the top five markets continue to garner more investor interest and stronger rebounds in values.

Statistics from Office Market First Quarter 2011 show that office transaction volume has already hit about $12 billion this past quarter -- about double from the same periods in the last two years. As information on more sales is verified, the total volume for the quarter could approach $15 billion.

The average year-to-date price/square foot in those markets as well as in San Francisco, Los Angeles and Boston all came in at more than $300. Whereas those prices were less than $100/square foot in Tampa/St. Petersburg, Chicago, Philadelphia, Atlanta, Detroit and Phoenix.

When it comes to how well properties are leased, investors are beginning to look more towards future income growth by targeting properties with higher vacancies.

Pricing for office properties with minor leasing exposure has started moving up substantially, according to Jay Spivey, director of research and analytics for CoStar. The weighted average price per square foot of office properties 70 to 80 percent and 80 to 90 percent leased came in at more than $200/square foot - doubling from just the summer of last year.

Prices for office properties 90 percent occupied or higher started to level off to just less than $250/square foot. Prices for office properties 70 percent occupied or less took a downturn in the quarter to a little more than $100/square foot.

Geographically, regional values are varying significantly. Based on peak-to-current price changes, office markets in the South and Northeast are off about 28 percent from their peaks compared to a national average of about 34.5 percent. Office markets in the Midwest and West were off about 38 percent.

– Courtesy of CoStar Advisor

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November 20, 2019, 1:51 pm PDT

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