Although activity is not as strong as it was at the peak in 2007, there is very strong interest. There is a lack of quality assets in the market, so everything that goes out gets a lot of interest. We're seeing good interest and buyer demand from REITs, private equity, institutions and operators, among others.
Moreover, pricing continues to increase. People feel good again about getting aggressive in underwriting rental rate growth because the leasing market seems to be quite strong.
So far this year, roughly $83 million worth of office assets have traded hands, according to according to early market analytics. That doesn't include the most recent Galleria acquisitions either. The deals that have sold this year have had an average cap rate of 8.5% and an average price of $193 per square foot.
Last year, 40 office buildings traded for more than $1.6 billion - a dramatic increase from the $414 million worth of office assets that sold in 2009. The pricing and cap rates are worth particular note: last year, the average sale price per square foot was $185 and the average cap rate was 8.5%; in comparison, in 2009, the average sale price per square foot was just $66 and the average cap rate was 10%.
As the economy has improved, buyers have started chasing deals again. Investment interest in the Energy Corridor submarket has been particularly robust.
For example, Energy Crossing, a 239,166-square-foot, class A office building garnered more than 35 offers from high-net worth and institutional opportunistic investors before trading to Lincoln Property Company. The seller was M&I Bank.
And, this past summer Trammell Crow sold Energy Center, a 332,000-square-foot office building in the Katy submarket to Wells REIT for $283 per square foot, the highest price per square foot in the history of Houston's suburban office market.
Sincerely,
Hunter Brink
Executive Officer
Remington Capital Inc.
(480) 248-9152 :: hunter@remingtoncapitalinc.com
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