BOSTON-Yet another office building has wended through the disquieted sales pipeline, and managed to fetch more than $300 per sf doing so, with BlackRock Real Estate paying $14 million for 121 High St. The five-story, 45,000-sf building was owned by Berkeley Investments, an active commercial real estate firm that is retaining its headquarters at that address in the heart of the Financial District.
A prime spot alongside such high-end behemoths as 125 High St. and International Place is one reason the class B property fetched substantial interest from varied capital sources, according to Meredith & Grew EVP Lisa Campoli, whose investment sales team negotiated the agreement on behalf of Berkeley. “It's an exceptional location,” says Campoli, who maintains that the property will perform even greater as the in-place rent roll turns over during the next few years.
Campoli says the unencumbered space should lease above in-place deals as the rent roster rolls gradually over the next few years. Rates now are estimated as being in the low $30-per-sf range, performing better than similar product but still expected to benefit from an improving market. “It's a gem,” Campoli says, praising the stewardship of the asset during Berkeley's tenure, one that began after the company paid $5.7 million for 121 High St. in early 1998. Occupancy is presently about 90%.
Efforts to contact Berkeley and BlackRock officials by press deadline were unsuccessful. One unanswered question is whether Berkeley will keep its headquarters at the building once its lease expires, said to be sometime in 2009. Besides ventures in suburban Boston and a major mixed-use project in Worcester, Berkeley has become a leading landlord in Boston's Fort Point Channel business district, with the firm having acquired a large piece of the Boston Wharf portfolio of former warehouses that was broken up beginning in the late 1990s. Berkeley bought into the area in late 2004 when it paid $100 million for 12 buildings and two parking garages. The firm has since sold some of those properties and is renovating others into office, retail and residential space.
While Berkeley is expected to benefit from rising class B rents in that part of town, BlackRock is joining other investors in believing older product in the traditional Financial District will also see rent accretion. Class B buildings there have traded in 2007 for as high as $490 per sf when the $300-per-sf mark was rarely topped in prior years. M&G, for example, just completed the sale of another Financial District property, 30 Winter St., for nearly $350 per sf, with buyers apparently unfazed by the nervous debt market that has slowed momentum in some sectors during the past two months.
Fundamentals continue to improve in downtown Boston, meanwhile, adding comfort to capital and suggesting good times ahead, says Campoli. According to the third quarter office market survey by Jones Lang LaSalle, class A space in the city now sports an average asking rate of $58.05 per sf, compared to $39.64 per sf for class B. The latter figure is up sharply since mid-year when it stood at $34.47 per sf.
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