HOUSTON-Sound economic dynamics, increasing replacement costs, unprecedented lease rates and a blessing by a Boston-based research firm mean that the city’s real estate, particularly in the CBD, is likely to trade at record rates this year. With class A space now hovering around the market’s top price of $285 per sf, experts tell GlobeSt.com that the record will likely be broken in 2007.

“919 Milam and Bank of America buildings will definitely exceed that,” says Rusty Tamlyn, senior managing director with Holliday Fenoglio Fowler LP in Houston. In recent months, marketing has gotten under way for handful of CBD buildings, including the 542,000-sf high rise at 919 Milam St., 1.3-million-sf Bank of America building at 700 Louisiana St. and 372,000-sf building at 1001 McKinney St.

Darrell Betts, senior vice president with Grubb & Ellis Co.’s Houston office, also predicts Downtown office sales will hit record levels in 2007, putting it down to increasing rental rates. According to Grubb & Ellis’ latest statistics, the CBD’s available space is 5.9 million sf in the 35.5-million-sf inventory or translating to 83.3% occupancy. Still, Betts points out, Downtown rents grew at an unprecedented rate of 13% during 2006.

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