Housing price increases have impressed observers for some time. Now it’s the office market’s turn.
That’s the case in AEW Capital Management LP’s plan to buy a Newport Beach office building for about $120 million, or $375 per square foot,a record price for the popular commercial hub near John Wayne Airport.
The Boston-based real estate investment adviser is in escrow on 100 Bayview, a red-granite, six-story building near the San Joaquin Hills (73) Toll Road and Jamboree Road, according to industry sources.
The 317,000-square-foot building, which narrows at higher levels, has a twin on Jamboree.
Brokers said the price per square foot is the highest yet for a major building in this real estate cycle and likely tops anything paid during the heyday of the 1980s. Sale prices sometimes are not disclosed and some beachfront offices can go for more, brokers said.
Investors are paying more for trophy office buildings with the expectation that office rents are on the rise, according to Bob Griffith, a broker with Grubb & Ellis Co., who is not involved in the deal.
Lackluster performance by stocks and bonds also make real estate an attractive investment, Griffith said.
“Until we see the stock market improve, we will continue to see capital flow toward real estate,” Griffith said.
Laguna Hills-based Muller Co. said last week it’s selling the building, confirming a story by industry newsletter Real Estate Alert that the sale price was $119 million. Muller owns the building with San Francisco’s Rockwood Capital Corp.
The sale price has nearly doubled since the partners bought the building for $68 million in 2003 from tenant Hewitt Associates LLC of Lincolnshire, Ill., according to the newsletter. Back then the building was 60% full. Occupancy now is more than 90%.
The sale of Bayview, which actually is two buildings connected by a glass-topped atrium, is being handled by Bob Smith and Michael Kane of CB Richard Ellis Group Inc. Kane declined to confirm the buyer.
An improving and diversified economy, limited construction of buildings and low interest rates have combined to heat up the office market here, Kane said.
Hewitt occupies about 30% of Bayview, with more than 10 years on its lease, he said.
The previous high was set last year by Los Angeles-based Maguire Properties Inc., which paid $363 per square foot for Washington Mutual Inc.’s Irvine campus on Von Karman Ave. The deal included land entitled for another building and more parking.
Maguire said last year that after factoring out the value of the land and parking the existing buildings sold for closer to $300 per square foot.
In another big sale last year, Knobbe, Martens, Olson & Bear LLP paid $315 to $325 per square foot for its headquarters at 2040 Main St. in Irvine, sources said.
