President and chief executive officer Richard D. Kincaid says, "It's still a seller's market," and does not expect that to change soon. The most attractive properties for the largest US office REIT are buildings with vacancy rates of 25% or more, he suggests.

While considering shedding assets in non-core markets, including a large chunk of an inherited industrial portfolio, Equity Office Properties picked up 18 properties during the third quarter for $606.2 million, or an average of $242 per sf. Those acquisitions included the 510,757-sf Commerce Plaza in Oak Brook, which Equity Office Properties reports was 85.2% occupied to begin October. The REIT paid $99 million, or $194 per sf for the East-West submarket asset.

However, a better example of Equity Office Properties' current strategy is found at 717 Fifth Ave. in New York City, which was 68.5% occupied to begin the fourth quarter. The price for the office portion of the Plaza District property was $495 per sf.

"We're getting good square-foot numbers at a significant discount to replacement cost," Kincaid says. "We don't find value bidding with 40 of our closest friends on a fully-leased office building."

With the exception of Chicago and Boston, vacancy appears to have peaked in most of Equity Office Properties' top markets. "It's very positive and bullish, this type of environment going on," Kincaid says.

Instant Insights /

Equity Office Willing to Buy Vacancy

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