Q2 2012 Boston, Massachusetts Office Property Sales Analysis

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Q2 2012 Boston, Massachusetts Office Property Sales Analysis

Metro Volume and Pricing

The recent pace of deals, with 8.7 million square feet sold over the past four quarters, may be normal for this market; compared with the inventory of 126 million square feet it represents an average 14.5 year holding period. But sales activity is modest compared with 2006, when more than $6.2 billion changed hands in 154 qualifying single property transactions.* The total for 2008 to 2011 combined was just under $6.2 billion in 146 deals. The second quarter saw 13 qualifying sales for $301.8 million at a mean price of $162 psf. In the quarter’s leading sale, Shorenstein Properties bought the 495,772-square-foot Seaport Center in Boston from The Beal Companies LLP for $115 million ($232 psf). The deal closed in May.

Top Submarkets

The CBD submarket led the metro area in square footage sold, dollar value sold, and average price per-square-foot over the past four quarters, at 3.5 million, $1.69 billion, and $481 psf.

Cap Rate Comparisons and Forecasts

The second quarter mean cap rate was 8.4%, up 170 basis points from the prior quarter. It pulled the rolling 12 month mean cap rate up 20 basis points to 7.9%. The rolling 12 month mean has been between 7.7% and 8.2% for the past seven quarters. It had been higher during the worst of the recession, but lower previously. Reis predicts little change through 2014, followed by a decrease to 7.3%.