Existing office building more expensive than occupied?
John Vanhara I was looking recently at some of the comps for office buildings. Some of the deals especially in the higher price range were sold for very reasonably price per sq. foot when comparing to new office buildings on the market.
Past sales:
List Price: $11,400,000, building sq. feet: 55,535, sold for $10,000. Price per sq. foot: $180. Occupancy 100%. CAP rate 7.5%. Sold: 7-12-2005
Another example:
List Price: $2,900,000, building sq. feet: 15,000, sold for $2,200,000. Price per sq. foot: $146. Occupancy vacant. Sold: 7-12-2005
Both above examples were finished office buildings. When you look at new office building on the market, they are sold as Gray shell. There are no walls inside, no drywall, no bathrooms, sometimes you get HVAC unit, but sometimes not. There is still about $50 per sq. foot investment necessary to complete the building.
The prices for the new ones are now in $200+ range. It is very common to see $220-$240 per sq. foot. I don’t see in the background of the above deals, but it seems interesting to see such low priced comps and at the same time sold out projects with much higher price per sq. foot. Maybe these are rare deals where buyers got lucky or maybe business owners buying new buildings have too optimistic view on their investments.