Districtreplaced as top market

The Washington, D.C., area is no longer the top market for investment in office space, new statistics show.

The National Council of Real Estate Fiduciaries said the total return on Washington office buildings, including cash flow and appreciation, fell from 12.08 percent to 11.76 percent in the last quarter of 2003. New York, meanwhile, saw returns jump from 9.01 percent to 12.29 percent.

Analysts said general economic growth has come faster in New York, while companies in Washington have been slower to expand. Government agencies, major drivers of office-space stability in Washington, have not sought new space because of budget constraints.

But analysts said investors should not worry. The total return on office space in Washington is still more than twice the national average of 5.67 percent, and Washington still boasts one of the lowest office vacancy rates in the country. Furthermore, analysts said the average return on office space in the Washington area is skewed by the suburbs, some of which still have high vacancy rates as a result of the technology collapse of the late 1990s. Downtown Washington alone boasts a 13.33 percent rate of return — more than a point higher than New York’s.

“While Washington remains very strong, they lost ground to New York as well as the national average,” real-estate services firm Delta Associates said. “This trend bears watching, although we expect Washington to remain among the premier investment markets in the nation through 2004 and beyond.”

Fila building sold

Fila USA, the famous maker of sports apparel and equipment, sold its 352,850-square-foot distribution facility in Pasadena, Md., to Merritt Properties for $10.3 million. The deal is another in a string of transactions involving industrial and flex space in the Baltimore suburbs, the latest hot spot for local commercial real-estate investors.

The Fila building sold for about $28 per foot, or about $16 per square foot less than the average sale price of industrial buildings last year. But analysts said the price is relatively high because the entire facility is empty.

“The Baltimore area continues to be a very attractive place for investors, and even an empty building like the Fila Building will catch attention of global real-estate investors,” said Bo Cashman, senior vice president of investment properties at CB Richard Ellis (CBRE), the lead broker of the sale.

Mr. Cashman said there were 18 other offers for the Fila building. CBRE’s leasing team is working to attract large tenants in need of distribution space.

The Fila deal comes after the HDG Mansur Group, a collection of international companies that invest in real estate, paid $23.3 million for a 278,000-square-foot warehouse in Hanover. The $83.64-square-foot purchase price was a record for the region.

In other news …

• The Crowell Moring law firm expanded its lease at 1001 Pennsylvania Ave. NW from 221,000 to 325,000 square feet. The firm now occupies 46 percent of the 14-story building, which is owned by the California Public Employees Retirement system and managed by Hines. Cushman and Wakefield was the broker of the lease expansion.

• Property Lines runs Fridays. Tim Lemke can be reached at 202/636-4836 or tlemke@washingtontimes.com.