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.
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%.