Office Prices Escalate as Vacancies Fall, Rents Rise
- Jun 30, 2011
Office prices in the Washington, D.C., area rose as a result of low vacancy rates and increased rents in the first quarter of 2011, according to Reuters. The District is also attracting global investors striving to buy properties in the area. According to John Kevill, managing director of Eastdil Secured, these investors are focusing on long-term appreciation and cash yield rather than on getting profit in the first few years following the purchase.
Reuters quoted two of the most important transactions that have been sealed in Washington, D.C., over the past few months. The sale of Market Square East & West in March holds the city record. The 621,710-square-foot office building located at 701-801 Pennsylvania Ave., N.W., was purchased by Wells Real Estate Funds from Beacon Capital Partners for $615 million, or $905 per square foot. Liberty Place, a 12-story office building located at 325 Seventh St., N.W., not far from the U.S. Capitol, was recently sold by Beacon Capital Partners for $139 million, or 870 per square foot, to Paramount Group Inc.
According to real estate research firm Reis Inc., the District area had a 9.2 vacancy rate at the end of the first quarter, the lowest of the 77 markets the company has been tracking nationwide. Ryan Severino, Reis senior economist, declared that this trend is expected to continue upward through the end of 2011.
In other real estate news, the fate of the Dulles Rail project is uncertain as the officials in charge of gathering funds for the multibillion-dollar development are running out of time. The Washington Examiner reported that the project’s stakeholders, the Metropolitan Washington Airports Authority and Fairfax County and Loundon County transportation officials, will meet Ray LaHood, the U.S. Transportation Secretary, in less than a week to agree on cost estimates for phase two of the project. The Examiner said this second phase is estimated to cost $3.5 billion; 75 percent will most likely come from Dulles Toll Road drivers. Under these circumstances the tolls might rise to almost $11 for a full-length trip on the 14-mile freeway by 2020. The airports authority also hopes to get approval for a low-interest federal loan of approximately $1.7 billion. Other financing could come from the state of Virginia, which could apply for a low-interest loan of its own.