Only one month into 2005, the capital markets are still humming with. From Seattle to Washington, DC, commercial properties are trading at rock-bottom cap rates as all manner of investor jockeys for deals. Landlords have taken notice, pushing the volume of offerings up dramatically.
"There’s just so much capital building up in the market now. It’s really remarkable," says Robert White, president of Real Capital Analytics, a Manhattan-based property research firm.
According to White, roughly 50% more properties hit the market last month than in the previous January. This mixed bag of offerings—which included retail, office and residential properties--are meeting heavy demand, too. White says that buyers aren’t showing any signs of pulling back, despite the Fed’s seemingly routine interest rate increases. This is coming off a year that posted many record sale prices.
"I’d love to say that it’s astounding but these records will probably be broken this year," says White.
Even a market such as Tysons Corner, Virginia is luring strong investor interest. After the dot-com bubble burst in 2000, this area of Northern Virginia was decimated by widespread office vacancies. Yet a 341,000 sq. ft. Tysons Corner office complex sold today for roughly $100 million. The properties—8300 Greensboro Drive and 1600 International Drive—were bought by an affiliate of Glendale, Calif.-based American Realty Advisors. The actual sale price was $97.5 million, according to CB Richard Ellis.
CB Richard Ellis broker Rob Faktorow says that strong leasing activity in the buildings has helped the owner increase rental rates by 37% over the past 12 months. For example, rents in the 8300 Greensboro property are nearing $30 per sq. ft. CB Richard Ellis represented the seller.
QuadrangleCorporation owned 8300 Greensboro Drive since 1994. The firm developed 1600 International Drive not long after that purchase. While the sale price may sound like a record for the Tysons Corner sub market, a 3-property McLean office complex sold in December 2004 for $121 million (or $286 per sq. ft.). The American Realty Advisors purchase tied that deal for price per sq. ft.
The president of seller Quadrangle Development Corporation has a simple reason why his two properties fetched a nine-digit sale price: "This is among the most desirable locations in Tysons Corner. The high purchase price reflects the quality of these assets," says Christopher Gladstone.