Property Costs Rise with Flow of capital.(BUSINESS)(PROPERTY LINES)

Article excerpt

Byline: Tim Lemke, THE WASHINGTON TIMES

The price of commercial real estate in and around the District has jumped in the past year, thanks to a flurry of investors swamping the market with cash.

With few other desirable places to put their money, investors have been willing to throw capital at real estate because of its relatively high returns and stability. The result: Increased competition for office space, with investors willing to pay about 10 percent more for property than last year.

The average price per square foot in the region is $200, or about $19 more than a year ago, according to a report released this week by the real estate firm Grubb & Ellis. The total volume of sales is expected to reach more than $4 billion, the highest level since 1998.

"As the economy and stock market continue to lag, commercial real estate's returns look more and more attractive," the report said. "As a result, the real estate market is flooded with capital from many different sources, and all are scouring the market and aggressively pursuing any opportunities that may be uncovered."

The number of real estate deals dropped slightly during the third quarter, mainly because there is not much new office space out there. But there have been a host of recent blockbuster transactions, particularly in the District. Real estate analysts said many deals have been signed before properties are even officially advertised as on the market and sellers are receiving dozens of bids.

In September, Equity Office Properties paid $54.9 million, or $351 per square foot, for the building at 325 Seventh St. NW. Earlier this month, the Bernstein Cos. paid $58 million, or $267 per square foot, for the Ballston Point office building in Arlington.

The biggest deal this year came last week when Wells Real Estate Investment Trust paid $345 million, or $376 per square foot, for Independence Square I & II, a 917,459-square-foot complex in Southeast that houses the National Aeronautics and Space Administration and the Office of the Comptroller of Currency. …