Q2 2012 Dallas, Texas Office Property Sales Analysis

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Q2 2012 Dallas, Texas Office Property Sales Analysis

Metro Volume and Pricing

An active first quarter with $443.6 million in sales for seven transactions at an average selling price of $152 psf was followed the quarter after by only a single deal meeting Reis’ reporting criteria.* In the latest sale, Adler Realty Investments paid Younan Properties $23 million ($58 psf) for the 394,324-square-foot, 50.0%-vacant, multi-tenant 4 Forest Plaza at 12222 Merit Drive, Dallas. The deal closed in late May at a 9.1% cap rate. The building, belonging to the Class B/C category, was built in 1985 and renovated in 1994. In a foreclosure auction, meanwhile, LNR Partners LLC paid $42 million for the 850,000-square-foot KPMG Centre at 717 N. Harwood Street, downtown Dallas, as reported by TREC in June.

Since the quarter ended, Cousins Properties (through CP 2100 Ross LLC) acquired the 33-story, 844,000-square-foot 2100 Ross building (formerly the San Jacinto Tower) at foreclosure auction for $59.74 million, GlobeSt.com reported in August. A fund created by Brookfield Asset Management has acquired a three-building 620,000-square-foot office campus in Las Colinas, TREC reported in July. The new owner “hopes to fill” the complex, now only one-third occupied by Citigroup. The price was not disclosed. JP Realty Partners has acquired the 45.0%-occupied, 17-story, 353,996-square-foot North Central Plaza III at 12801 N. Central Expressway “as part of its plan to add more than a million square feet to its investment portfolio in Texas,” TREC reported in a separate July entry.

Top Submarkets

The Dallas CBD submarket led all others in property volume sold in single-property transactions over the past four quarters at 1.9 million square feet. The low $31 million sales total reflects the $15 psf sale last August of the 1.3-million-square-foot Elm Place building, now the site of one of downtown’s major redevelopment endeavors. With 1.88 million square feet exchanged, Las Colinas was a close second in property total. Its dollar volume, however, was considerably higher (highest metro wide) at $264 million. For 1.05 million square feet sold, Plano/Allen saw $209 million change hands. Among submarkets with substantial sales totals, Uptown led in average selling price at $217 psf. Per-square-foot averages for Las Colinas and the Dallas CBD were $141 and $16.

Cap Rate Comparisons and Forecasts

With sales volumes running low, average cap rates measured by the quarter have been erratic. The latest quarter’s 9.1% “average” (for a single sale, as noted) was up from first quarter’s 6.7% but was down from the 13.0% mean recorded for second quarter 2011. The 12-month rolling cap rate has been somewhat steadier. While it too has fluctuated, a discernible overall downward trajectory has been apparent. This rate per the latest quarter was 8.0%, down from 8.8% and 9.2% one and four quarters prior. Second quarter 12-month rolling cap rates for the Southwest and U.S. office markets were 8.3% and 7.5%.