Western Real Estate Business magazine covers the multifamily, retail, office, healthcare, industrial and hospitality sectors in the Western United States.
Issue link: https://westernrealestatebusiness.epubxp.com/i/873170
72 • September 2017 • Western Real Estate Business www.REBusinessOnline.com INVESTORS TURN TOWARD OFFICE MARKETS IN CALIFORNIA, SEATTLE, PHOENIX The California, Phoenix and Seattle office markets enjoyed healthy growth and continued to attract buyer interest in the second quarter of 2017, per the latest reports compiled by commercial real estate services provider COMMERCIALCafé. By Roxana Poenar T he California office market continues to thrive. It saw a total of 57 transactions close across six ma- jor markets, includ- ing Los Angeles, the Bay Area, San Fran- cisco, Orange Coun- ty, Sacramento and San Diego. Despite the significant differences among these markets, the report shows that California's office sector continues to thrive. The Los Angeles office market closed the second quarter with $2.2 billion in sales volume and 19 major transactions. The average price per square foot reached $323, marking an increase of 13 percent year-over- year. Dollar volume also climbed 39 percent from the first to the second quarter. The largest deal that closed in the second quarter was the $573 million sale of 1999 Avenue of the Stars in Century City, which was bought by JMB Realty from Blackstone affili- ate Equity Office Properties Trust in April. In the Bay Area, office sales volume reached $1.1 billion during this time period. With a total of 16 large transac- tions closed, the average price of $416 per square foot is the highest num- ber registered in the Bay Area in the past five years, surpassing prices in Los Angeles by 29 percent. The most notable transaction was The Grove's Buildings III & IV in Los Gatos, which was acquired by King Asset Manage- ment for $197 million in June. The Orange County office market concluded the second quarter with nine major transactions. Despite the small number of sales, the total dol- lar volume increased 44 percent year- over-year, reaching $462 million dur- ing this time. The average price per square foot for office assets trading in the area rested above $200. Orange County's largest deal of the quarter was closed in April by Emmes, which acquired the Centerview East & West buildings in Irvine, from Sho- renstein for $220 million. San Francisco lagged in terms of of- fice sales volume, with $777 million worth of properties trading in seven notable transactions throughout the second quarter. Though sales num- bers dropped, San Francisco boasts the highest average price per square foot at the close of the quarter, at $555. The most expensive sale of the quarter oc- curred in April when Beacon Capital Partners bought the 746,284-square- foot tower at 44 Montgomery Street from Seagate properties for $475 mil- lion. The office market in Sacramento doubled its sales volume from the first quarter to the second quarter of the year, settling in at $279 million. Only four large transactions closed during the three months that made up the second quarter, with an average price per square foot resting at $338— the highest number in five years. The largest deal of quarter two closed for $121 million. This was the Park Tower building at 980 9th Street, which was acquired by Hines Interests from CIM Group. San Diego had a weak second quar- ter, with only two large transactions closing for a total of $46 million. Aver- age prices rose from the first to second quarter, reaching $253 per square foot at the end of June. The largest deal to close in San Diego was the $26 million sale of the Sorrento Heights Innova- tion Center in Sorrento Valley. The property was bought by HCP from Colony Partners in June. Seattle Office Market Gains Traction in Q2 The Seattle office market is pick- ing up steam at the end of the second quarter. With only six notable trans- actions closed, office sales volume reached $933 million in this quarter, resulting in an 18 percent increase year-over-year. The average price per square foot climbed to $781, while the largest deal of the quarter closed for $33 million. The property at 1007 Stewart Street and dubbed Midtown 21 was bought by Frankfurt-based Union Investment from a partnership between Trammell Crow and MetLife. Q2 Sales Volume Doubles Year-Over-Year in Phoenix The Phoenix office market piqued investors' interest in the second quar- ter of 2017. A total of 20 large deals closed during this period for a total sales volume of $513 million. The number of sales has doubled year- over-year, and the dollar volume has almost doubled as well. Resting at $174, the average price per square foot rose considerably at the end of the sec- ond quarter, after hitting a five-year low of $102 in the first quarter. The sale of two Class A proper- ties at 3131 and 3133 East Camelback Road was the largest deal closed in the Phoenix market in the second quarter. Goldman Sachs Asset Management acquired the asset from Lincoln Prop- erty Co. for $81.7 million. Roxana Poenar, Copywriter, COMMERCIALCafé Poenar Data provided by Yardi Matrix Q2 2017 - California Office Markets Data provided by Yardi Matrix Data provided by Yardi Matrix Seattle Office Sales 2013-2017 Phoenix Office Sales 2013-2017