News: Front Section

NAI Hunneman: Suburbs dominate recent office sales - by Liz Berthelette

Liz Berthelette
NAI Hunneman

As discussed in our Q1 2018 office market report, transaction volume failed to make headway in Boston’s office market during the first quarter of 2018. With that said, Boston remains a highly-desirable destination for capital among all investor types, and the limited inventory of available properties for sale continues to drive up pricing. 

Similar to national office trends, suburban investment is on an upswing. Investors seeking higher yields and greater opportunities are driving this expanded activity. In fact, more than $1.3 billion in suburban assets have changed hands in the last two quarters. In Boston’s urban markets, which encompasses Cambridge, less than $500 million transacted during the same time frame. Three out of the top four largest first-quarter office transactions took place in the ‘burbs, with CrossHarbor Capital Partners’ $277 million purchase of Cross Point in Lowell representing the top deal. Spear Street Capital’s $88 million acquisition of the former Reebok campus in Canton was another major sale that closed in early 2018. 

As a result, pricing growth has finally started to gain some momentum in Greater Boston’s suburbs; expanding by 30% from Q1 2017 to Q1 2018. Barring this recent surge, suburban sale prices have remained relatively stable. It wasn’t until very recently that pricing had reached the previous cycle’s peak. While growth has slowed in the urban markets, pricing remains elevated near peak levels and the delta between urban/suburban pricing is as wide as ever. (see Chart 1)

Chart 1

 

Chart 2

 

As a result, when downtown assets do change hands, buyers will pay a premium. Exan Capital recently purchased 40 Court St., 109,705 s/f class B asset in the Financial District for $54 million or $492 per s/f at a 4% cap rate. Stars Investment paid just $31 million for the building in 2014. The sale of 28 State St. is reportedly nearing completion, with an estimated price tag of $430 million or $745 per s/f. This would represent a 25% price increase from the asset’s 2014 sale. 

Finally, Tishman Speyer’s yet-to-be-delivered Pier 4 office building could fetch $420 million or a whopping $1,100 per s/f. (see Chart 2)

Given these pricing trends and the lack of available product for sale in urban Boston, investors will continue to seek value in suburban assets. 

Liz Berthelette is director of research at NAI Hunneman, Boston, Mass.

MORE FROM Front Section

Newmark negotiates sale of 10 Liberty Sq. and 12 Post Office Sq.

Boston, MA Newmark has completed the sale of 10 Liberty Sq. and 12 Post Office Sq. Newmark co-head of U.S. Capital Markets Robert Griffin and Boston Capital Markets executive vice chairman Edward Maher, vice chairman Matthew Pullen, executive managing director James Tribble,
READ ON THE GO
DIGITAL EDITIONS
Subscribe
Columns and Thought Leadership
Make PR pop by highlighting unique angles - by Stanley Hurwitz

Make PR pop by highlighting unique angles - by Stanley Hurwitz

Coming out of the pandemic, a client with three hotels in Provincetown, Mass., needed ways to let the world know his properties were open for business for the 2021 tourist season.
How COVID-19 has impacted office leasing - by Noble Allen and John Sokul

How COVID-19 has impacted office leasing - by Noble Allen and John Sokul

To say that the effects of COVID-19 has transformed office leasing is an understatement. When COVID-19 was at its peak, office spaces were practically abandoned either through governmental mandates or through actions taken by businesses themselves.

Five ways to ruin a  Section 1031  Like-Kind Exchange - by Bill Lopriore

Five ways to ruin a Section 1031 Like-Kind Exchange - by Bill Lopriore

While there is some flexibility when structuring a like-kind exchange, some important requirements must be met. A mistake can ruin your exchange. Here are five mistakes to avoid:
Four tips for a smooth 1031 Exchange - by Bill Lopriore

Four tips for a smooth 1031 Exchange - by Bill Lopriore

Many real estate investors do not understand the specific requirements that must be met to secure the benefits of a tax-deferred 1031 exchange. For example, the replacement property must be identified within 45 days of the closing date of the relinquished property.