Newspaper article THE JOURNAL RECORD

Outsiders Seek Opportunities

Newspaper article THE JOURNAL RECORD

Outsiders Seek Opportunities

Article excerpt

The escalating occupancies of Oklahoma City office buildings and the dearth of new construction means that for the first time in years, brokers are getting return phone calls from out-of-state institutional investors.

The March sale of The Tower office building at 1601 Northwest Expressway brought affiliates of Goldman Sachs into the market. With a sale price of $31 million, the W9/PHC Real Estate LP paid more than $104.68 per square foot.

"For many years, if it was in Oklahoma or Oklahoma City, you just didn't get the return phone call," notes Ron Dixon, vice president of investment brokerage at Trammell Crow/OKC. Dixon, along with marketing principal Jeff Hardy, brokered The Tower sale. The two have tracked the sales of city office buildings since 1990. Overall, sales of office buildings have gone from about $25 per square foot in 1990 to near $55 per square foot today. In 1995, the average hovered from $20 to $30 per square foot, and in 1996 rose to $30 to $40 per square foot. "Then a year ago they were $40 to $50, and now they're starting to trend up above $50 for the general broad class of buildings," Dixon says. Driving the trend is the lack of new construction, growth in the office market and investors looking for a good opportunity. But the price per square foot has not risen close to reconstruction cost, which ranges from $105 to $120 per square foot for a Class B building. "The end point of the curve is approximately half of reconstruction rates of general Class B space," Hardy explains, "so there's still a long way to go." Call centers have made an impact on the office market, bringing up occupancies in the Class B and Class C market. "That in turn allows us to increase rates on Class A properties because they don't have as many options to fall down to," Hardy says. As the real estate industry securitizes, real estate investment trusts, life insurance companies, endowments and public and private funds are looking for a place to put their capital. …

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