"Office properties with longer-term credit tenants are in high demand in today's market," says Wise, a real estate professional for the past 25 years. "A great deal of capital is available for well-located office properties with credit-worthy tenants, but there is not enough supply."
Third-quarter office building sales totaled $293.2 million for an aggregate 2.6 million sf on 22 transactions, up from volume of $128.6 million on 32 deals in the same period last year, Wise notes. Among the transactions were 17 class B buildings, three class A structures and two business parks.
The price per sf ranged from a high of $206 for a Central Perimeter class A office building to a low of $44.25 for a class B Northeast location. Class B volume totaled $152.8 million on 1.7 million sf that sold for an average $90.38 per sf. Class A sales totaled $131.2 million on 703,000 sf for an average $186.56 per sf. Business park sales totaled $9.2 million on 163,265 sf for an average $56.35 per sf. There were no class C sales in the third quarter.
"Multi-tenant office properties continue to be challenged in the Atlanta office market," says Wise who is the senior director in the National Office and Industrial Properties Group at the local office of Marcus & Millichap. Wise and M&M put out separate market reports.
Wise says "landlords are trying to retain existing tenants and hold rental rates on renewals." On the buying-selling front, "the pricing expectations of the seller are challenged, as buyers continue to make offers at levels unacceptable to many sellers," the broker says. Because of that scenario, "many owners have decided to refinance and hold, rather than sell in today's market."
The most notable third-quarter sale was the $80.5-million acquisition by locally based Wells Real Estate Funds from New York-based Teachers Insurance of Glenridge Highlands II on Aug. 1 for $194 per sf. "This was a single-tenant office building, well-located in the Central Perimeter submarket," Wise says.
Although class B property sales outnumbered class A, the per-sf-price was down slightly among B assets in the third quarter. The year-to-date average per-sf price of $89.25 compares with $98.83 in 2002; $91.14 in 2001; $77.78 in 2000; $88.82 in 1999; and $93.75 in 1998.
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