New York-based Colonnade Properties LLC has acquired NationsBank Plaza in downtown Tampa, Fla., from Atlanta-based Lend Lease Real Estate Investments Inc., reportedly for $50 million. New York-based Cushman & Wakefield represented Lend Lease.
Located at 400 N. Ashley Drive, the 32-story tower is 82% occupied and totals 512,851 sq. ft. Known as "The Beer Can" because of its shape, the Colonnade deal ends a two-year search for a buyer for the 12-year-old building, according to local reports.
A Capitol idea: developers/owners can't go wrong in D.C. Most every month, we could fill these two pages with news of Washington, D.C.-area deals. The District's renaissance and northern Virginia's technology explosion have created an overwhelming demand for office space. That technology explosion also places rents in northern Virginia near CBD rates. Lest we forget, the Maryland suburbs also benefit from the boom.
"Our Class-A vacancy is at an all-time low, and that's continuing to force rates up," says Trip Howell, senior vice president in Grubb & Ellis' Washington, D.C. office. "We find that, nationwide, whether it was the credit crunch or better underwriting or better planning by local governments, it's a situation that's converging right now, and we have tenant demand that can't be met with the current supply."
A sign of the times, with rents in the CBD in the mid-$50 range, the days of the D.C. law firm managing partner basking in a 300 sq. ft. office are gone, as the firms - and everyone else - have to maximize the use of their space, Howell says. Those poor, unfortunate managing partners now are stuck in 180 sq. ft. offices.
While help is on the way, almost two-thirds of the CBD office space in the pipeline is preleased, according to Grubb & Ellis. During the next two years, the 5.3 million sq. ft. under construction will add less than 2.8% to the District's office inventory. Notable preleases include Sidley & Austin taking 190,000 sq. ft. at 1501 K St., and Holland & Knight's lease of 130,000 sq. ft. at 2099 Pennsylvania Ave. N.W.
Marketwide, metro D.C. absorbed 8.2 million sq. ft. in the first half of 2000, with northern Virginia leading the way with 5.3 million sq. ft., according to Alexandria, Va.-based Delta Associates. In the CBD, 57% of the absorption was in Class-A space. At this pace, the D.C. area will set a record for absorption and have the nation's highest level by a factor of two, according to Delta Associates. The metro area's mid-year vacancy rate of 4% also set an all-time low.
"I don't think we're going to see relief, at least on rental rates, because the mature locations are spoken for," says Howell, a D.C. broker for 15 years. "We're starting to move again into the pioneering, less mature locations, which because of pent-up demand will, in fact, mature very quickly. We have an opportunity to have really successful projects on the fringe. There are only so many tenants willing to pay $50 to $60 per foot, but they need to be here.
"Many organizations, particularly the associations, are driven by annual budgets," continues Howell. "They can't afford to pay what the service businesses are paying. They're going out to the fringe locations, and they'll go to the further suburbs."
On the sales side, hungry pension funds, private developer/owners and a handful of REITs invested $1.3 billion in D.C.-area office properties. While the region's pace is slightly ahead of 1999, the average sales price has risen from $187 per square foot to $194 per square foot since last year. Although the current sales market is nowhere near on pace to match 1998's $4.6 billion total, there's still plenty of action, says Steve Gichner, vice president in Grubb & Ellis' D.C. office.
"It's not as competitive as prior to the credit crunch, but it's still healthy," says Gichner. "There's still a high amount of volume, and there's still great liquidity. There are buyers for most properties and plenty of properties on the market."