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News release

WASHINGTON, D.C.

Foreign Investors Account for Over Half of Office Building Sales in Washington, DC in 2013

Year-end sales volume in Washington, DC totals $2.6 billion, down from $3.4 billion in 2012, driven by inflows of foreign capital


WASHINGTON, Jan. 9, 2014 – In 2013, foreign buyers accounted for 58.1 percent of single-asset sales in the District of Columbia, according to research released today by Jones Lang LaSalle. Historically, foreign buyers have accounted for 18.3 percent of transactions, and in 2012, foreign buyers accounted for 30.7 percent of sales in Washington, DC.

Adding portfolio transactions, such as the Norges and Alony Hetz transactions, increases the amount of foreign investment in the District of Columbia in 2013 to 60.1 percent.

“Despite sequestration, the federal government shutdown and the lack of a budget, DC had record foreign investment in 2013 at record low yields, further confirming the city’s global prominence and long-term fundamental strength,” said Bill Prutting, Managing Director, Jones Lang LaSalle. “In a continuing trend, core downtown properties captured the largest share of transaction volume in 2013, exceeding 2012’s volume by over 25 percent.

“In 2013 we saw capital sources, primarily from Asia and the Middle East, investing in Washington, and witnessed continued investment from Germany as all foreign capital worked toward geographic diversity.  We expect these new investors to continue building on their newly-acquired positions, and new and diverse overseas capital sources to successfully invest in 2014,” added Prutting.

The average price for buildings downtown increased by 27.7 percent to $580 per square foot, as compared with $454 per square foot in 2012.

“The fundamentals of the Washington, DC office market are sound, and investors were driven to the solid cash flows and low levels of risk that core properties provide,” said Scott Homa, Vice President Research, Jones Lang LaSalle. “Although the increase in pricing in 2013 was partially attributable to a high volume of well-leased, well-located buildings trading – especially as a proportion of overall sales – the stabilization of the market and improved growth outlook for 2014 were definitely contributing factors to the escalation in average pricing.”

Metro Washington, DC stats 2013
•    Sales volume:  $4.5 billion, approximately a 16.1 percent decrease from the year-end volume of $5.4 billion in 2012 (excluding portfolio sales)
•    Price per square foot: $368, a marginal increase from the average of $359 for 2012
•    Cap rates: averaged 5.9 percent
•    Properties traded: 72, down from 74 in 2012 and below the 10-year average of 99 per year

Washington, DC stats 2013
•    Sales volume: $2.6 billion (accounting for 58.1 percent of 2013 sales volume in metro Washington, DC), a decrease of 26.3 percent from the year-end volume of $3.4 billion in 2012
•    Price per square foot average:  $580, an increase of 27.7 percent from the average of $454 in 2012
•    Cap rates: averaged 5.2 percent
•    Highest price deals: 

     - First half of the year: 1200 19th Street, NW to Fosterlane/Kuwait Investment Authority for $296 million ($886 PSF)

     - Second half of the year: on a PSF basis, 700 14th Street, NW to Paramount ($730 PSF); on an overall basis, Washington Harbor to Simone/Principal ($370.0 million)

Northern Virginia

•    Sales volume: $1.2 billion, down from $1.6 billion in 2012
•    Price per square foot average: $265, down from the average pricing of $306 per square foot in 2012
•    Average cap rates: 7.0 percent

“In Northern Virginia, the decrease in sales price is mainly attributable to a change in the profile of assets trading, with a larger share of value-add properties changing hands, which also impacted the cap rates,” added Prutting.

Suburban Maryland
•    Sales volume: $720.3 million, up substantially from 2012 but approximately $127.3 million shy of the 10-year average
•    Average price per square foot: $216, just above of the 10-year historical average of $210 per square foot

“In Maryland, sales figures were boosted by the sale of the Air Rights Center, the largest purchase by dollar amount at $205 million, and 7220 Wisconsin Avenue, the highest per square foot sale at $399 per square foot,” added Homa.

To view all of the Washington region market reports please visit: http://www.joneslanglasalle.com/Washington-DC/en-us/Pages/Research.aspx

About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual revenue of $3.9 billion, Jones Lang LaSalle operates in 70 countries from more than 1,000 locations worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services to a property portfolio of 2.6 billion square feet and completed $63 billion in sales, acquisitions and finance transactions in 2012. Its investment management business, LaSalle Investment Management, has $46.7 billion of real estate assets under management. For further information, visit www.jll.com.