GlobeSt.com UPDATE: Third-Quarter Office/Industrial Sales Lag

ATLANTA-Carter and Associates third-quarter office and industrial market report reveals sharp drops in office and industrial sales. However, while the price of office property is dropping, the price per sf for industrial property is higher than 2000.

Two major forces will determine the opportunities for buyers and sellers in the Atlanta market, the report says.

They are uncertain or falling tenant demand, which will tend to lower the value of investment real estate; and historically low interest rates and returns on alternative investments, which should tend to bolster or even increase the value of investment real estate.

In the office sector, there were only nine recorded office sales greater than 30,000 sf here during the third quarter, totaling 1.37 million sf. Total quarterly sales volume of $152.7 million was about half the quarterly average pace of $292.5 million in 2000.

The Concourse I and II sale (575,000 sf at 138 per sf) in late July accounted for 52% of the dollar amount of total metro area office sales and 42% of the total space.

For the first nine months of 2001, total sales were $484.1 million (4.44 million sf) in 37 properties, about half the pace of 2000. All but five of these sales were from the Buckhead submarket north, and 16 were in the Northeast submarket. The average price was $108.94 per sf.

Thirty-one of the 37 sales were class B properties, accounting for 2.43 million sf of the space sold, at an average price of $81.97 per sf, down from $86.39 per sf for class B space in 2000.

Four of the sales were class A, accounting for 1.83 million sf, at an average price of $148.92 per sf compared to $158.36 per sf for class A in 2000.

On the industrial side, there were five recorded arm’s length industrial sales greater than 50,000 sf valued $47.7 million. In 2000, more than $100 million worth traded hands in an average quarter.

Moreover, one sale accounted for 55% of the dollar volume: The Principal Mutual sale of Oakbrook Tech to First Industrial Realty. The 512,540 sf also made up almost half of the 1.08 million sf sold during the quarter. The property sold for $51.12 per sf.

The average price was $44.22 per sf. The report attributes it to the higher than usual office build-out. Without the Principal Mutual sale, the average price for the quarter was $37.97 per sf, which is 23% higher than last year’s cumulative average of $30.91 per sf across 73 sales.

Total sales volume of $172.5 million is running at a pace just more than half that achieved in 2000. The 4,66 million sf sold through the end of September is less than half the pace set last year at this point, confirming that the average size of this year’s sales is so far slightly smaller than last year (155,158 sf vs.184,931 sf).

The average price across all industrial sales in the first nine months of the year was $35.39 per sf, compared to $30.91 per sf for all of 2000.