| NEW YORK, June 23
NEW YORK, June 23 Beacon Capital Partners has
sold Liberty Place, a 12-story building located six blocks from
the U.S. Capitol, for $139 million or $870 a square foot,
underscoring the ongoing strength of the Washington, D.C., office
Paramount Group Inc was the buyer of the building at 325
Seventh St. NW overlooking the National Mall, said Eastdil Secured
Managing Director John Kevill, who co-brokered the sale with
partner Collins Ege.
Office prices in Washington have skyrocketed as vacancies have
fallen and rents have finally begun to rise as a result of the
spending by the federal government and the lobbyists it attracts.
The market is severely constrained because buildings in the city
cannot be higher than the U.S. Capitol, which usually restricts
them to 12 or 13 stories.
In the first quarter Wells Real Estate Funds Inc bought Market
Square East & West for $615 million or $905 per square foot, a
record for the city.
Values have been soaring as measured by the first-year yield,
called a capitalization rate, or "cap rate," which moves in the
opposite direction of prices.
"It's been amazing how much cap rate compression we've seen
for prime assets in D.C. and Manhattan," Dan Fasulo, managing
director at Real Capital Analytics, said. "It's clear to me
that the last several trades have come in at sub 5 cap rates,
which is aggressive."
Washington attracts global investors interested in buying
and holding on to their properties, Kevill said.
"What they want to do is buy exposure to the stability and
long-term growth of the Washington trophy market," Kevill said.
"They're not concerned with income in the first few years.
They're focused on long-term appreciation and long-term cash
Since the U.S. commercial real estate market faltered during
the credit crisis, Washington has been leading a turnaround of the
priciest U.S. cities.
At the end of the first quarter, vacancy in Washington was 9.2
percent, the lowest of the 77 markets in the country tracked by
Reis, and down from its peak of 10.9 percent in the third quarter
2009, according to real estate research firm Reis Inc.
Meanwhile, asking rents bottomed in the fourth quarter last
year and turned positive in the first quarter this year for the
first time since the second quarter of 2009.
"We expect that to continue to trend upward through the end of
the year," Reis Senior Economist Ryan Severino said. "Past that,
we do expect to see continued rent increases in Washington."
(Reporting by Ilaina Jonas)