The plan for value-add investors like Highridge and others, Shannon explains, was "to buy at the right basis, stabilize the property and then sell into a better market." Highridge repositioned the 246,763-square-foot-tower, and increased occupancy from approximately 50% to over 90% before selling to TA Associates.

The capital markets for core and core-plus product have improved dramatically since Highridge bought 3 MacArthur, Shannon says, so buyers aren't just looking at price per square foot anymore. Another factor in the evolving market is that Orange County's 100-million-square-foot office market has started to recover, posting five straight quarters of positive absorption, according to a second-quarter report by CBRE.

The combination of improved capital markets, the optimism generated by a recovering office market and the prices commanded by properties like 3 MacArthur are all factors that will drive additional office sales both in Orange County and other US markets this year, Shannon believes. "As we head toward the year end, there will be more deals taken off the shelf just on the basis of the prices achieved by the most recent sales," he says. He anticipates that deal flow will be especially strong in the fourth quarter, which is traditionally a big quarter anyway but is likely to get a boost from the rising prices and improving fundamentals, especially in some markets.

Shannon cites Seattle, the San Francisco Bay area and other places where fundamentals have been improving faster than they have in Orange County. The recovery in pricing is more pronounced in those markets because the fundamental recovery is so much farther ahead, but investors in Orange County today are nonetheless much more optimistic than they were a year or two ago. "We haven't had any rent spikes here like those in Seattle or San Francisco," he says, but the buyers are anticipating that the rents in Orange County will increase in a couple of years. In Los Angeles and Orange counties combined, he notes, the dollar volume of office sales is up 123% for the first six months last year versus the first six months of last year: $2.91 billion compared with $1.027 billion. Although more of that is in L.A. County, and Orange County is down some from last year's six-month total, Shannon says, "I think you are going to see more of those core and core-plus deals hitting the market" in Orange County.

In the past month, in addition to the 3 MacArthur deal, Shannon and other CBRE brokers have negotiated the sales of 2600 Michelson for $70 million and 7700 Irvine Center Drive for $56.5 million. In the four largest OC sales that CBRE has been involved in this year, "Each one is either a trophy or a train wreck," Shannon says.

"We think what's going to happen for the rest of the year in Orange County is going to be more trophies and train wrecks." The trophies are the core and core-plus deals like 3 MacArthur, while the train wrecks are the special servicer sales. One of the biggest sources of special servicer sales has been MPG Office Trust, which has disposed of all of its Airport submarket properties but is now expected to dispose of troubled assets in Central Orange County.

In the 3 MacArthur Place sale, Shannon and Bob Smith led a CBRE Institutional Group-West team also including Paul Jones, Ken White, Mike Moore and Karen Scholte who represented the seller. Smith and Shannon also led the teams on the sales of 2600 Michelson for $70 million and 7700 Irvine Center Drive.

The good news for capital seeking deals both in Orange County and in other markets is that there is going to be more product to choose from as time goes on, Shannon says. "There has been a scarcity premium for most of this recovery period, but the choices will be more abundant now," he says. Pricing in Orange County is still well-below replacement costs and well below peak pricing, so "The market has a lot more legs because the fundamentals still have a long way to go," he says.