San Francisco’s Big Deal
The City by the Bay
started the new year off right, with the highest price yet paid for an office
property. Invesco bought 101 Second St., a 90 percent leased office building in
San Francisco’s South Financial District, for $291 million, or $750 psf.
Purchased from Hines, the deal’s cap rate was estimated at 3 percent, a new low
for San Francisco, where the 4Q13 average cap rate was 4.9 percent, far below
the national office average of 6.5 percent, according to Kidder Mathews. While
transaction volume for San Francisco office properties was slow for most of
2013, 4Q picked up with 20 properties trading hands. The average price for 4Q13
office transactions was $459 psf.
A number of stabilized retail assets traded hands last year in the Seattle market as institutional investors targeted the area. Dollar volume of transactions topped out above 2007 while the number of transactions was about half as many. Cap rates rose from 7.0 percent at YE12 to 7.6 percent at YE13, reflecting increased activity for strong B and C product.
Source: Kidder Mathews
Top Commercial Real Estate
Based on the percent
change in vacancy and rental rates for the office, retail, and multifamily
sectors from 3Q 2012 – 3Q 2013, as well as population and unemployment changes
1. Orlando, Fla.
2. Portland, Ore.
Source: Coldwell Banker
“New York and Washington,
D.C., accounted for more than 5 million sf of office space net absorption –
well over a third of national absorption gains between October and December
2013 … The strong year-end showing reversed the previous four-quarter trend
where more than 5 million sf was returned to the market.”
Jones Lang LaSalle, 4Q
2013 National Office Market Report
More than 71 million sf of
industrial space is under construction with the Midwest making a strong
showing. At least five Midwest cities have more than 2 million sf under
construction: Chicago, Cincinnati, Dayton, Ohio, Kansas City, Mo., and
Source: Cassidy Turley
Looking for a multifamily
investment market with a little risk but great potential? Try Detroit, which
tops Marcus & Millichap’s high yield markets in its 2014 Apartment Report.
While Motor City has its economic troubles, apartment performance has been
strong, the report says, adding “With the auto industry still building
momentum, Detroit offers investors a unique operating environment at a modest
entry point.” The list of cities where the economy is getting stronger but
multifamily prices still remain reasonable is a virtual who’s who of secondary
Midwest markets, including Detroit, Cleveland, Cincinnati, Pittsburgh,
Indianapolis, Columbus, Ohio, and Louisville, Ky.