Investor demand for Baltimore office buildings is soaring, according to a new report from CB Richard Ellis. More than $1 billion in sales transactions closed during the first half of 2007, and that’s nearly twice the sales volume achieved during all of 2006.

The report finds that Class-A stabilized office assets are being valued at mid to high 6% capitalization rates. And so-called “value-add” assets, or properties in need of repositioning, are luring out-of-town investors.

Buyers continue to cite the steadily improving market fundamentals within the Baltimore metro area, according to the report.

Among those market strengths: “Baltimore’s location in relation to Washington, D.C. and the traditional market drivers for Baltimore like healthcare, the legal profession, the defense industry, financial services and BRAC [Base Realignment and Closure].”

Baltimore office vacancy rates have steadily improved during the past 36 months. Rental rates, which are a lagging indicator of occupancy demand, have also risen over the past year. Office vacancy registered 12.3% at the end of March.

CBRE expects redevelopment of the city to continue and the suburban markets to remain stable with modest new development, according to the report.