Office properties draw investment dollars

Nearly three-quarters of dollars invested in commercial properties were spent on office or apartment properties during the first quarter of 2001, according to national transaction data compiled by the CCIM Institute and Landauer Realty.

The CCIM/Landauer Investment Trends Quarterly represents a broad-based sampling of first-quarter 2001 transactions with a total value of $11.7 billion, the majority of which were reported by certified commercial investment members (CCIMs).

The report, summarized in a release from the CCIM Institute, revealed that the office market accounted for 55.5 percent of the dollar volume for all commercial properties while the multifamily market remained in second place with 17.9 percent.

Nationwide, investments in commercial property remained robust. The percentage of investment dollars chronicled in the CCIM/Landauer database in first- quarter 2001 was 10 percent below the figure for the final quarter of 2000. According to the report, 2000 culminated with a surge in commercial real estate activity, eclipsing the previous year's dollar volume by 33.2 percent.

"Real estate continues to offer initial returns of close to 10 percent on average, with the expectation that returns in the low teens could be achieved over a reasonable holding period," said CCIM Institute President Darbin T. Skeans.

"In these anxious times for common stocks, property once again looked like a relatively safe sector with attractive dividend characteristics," Skeans said.

The stellar performance of the office sector in terms of dollars spent nearly was equaled by the percentage of deals reported.

Of the six primary commercial property categories covered in the report, offices accounted for a record 29.2 percent of the first-quarter deals.

"The transaction record for the office market demonstrates that investors are putting a tremendous vote of confidence in the so-called 24-hour cities," said Hugh F. Kelly, CRE, principal author and editor. "And, as economic risk became more apparent and Wall Street indexes pushed into bear market territory, mixed- asset investors took to real estate as a hedge."

Apartment deals accounted for 22.1 percent of all transactions, with a significant number of transactions attributed to institutional investors. This contention is supported by an average deal price for multifamily properties of $19.6 million and an average complex size of 274 units.

One sign of nervousness within the industry surfaced in the national land market, which plummeted to its lowest dollar volume since 1996. The dollar volume of first quarter land sales dropped by 80.4 percent from the previous three-month period and may signal a retreat in new development. This follows a stellar year for the land sector, which saw transactions rise 52.5 percent in 2000 compared to 1999.

The median price per acre of undeveloped land rose to $178,421 from $165,517 in the last quarter of 2000. The southeast region, a hotbed of new development activity, again led all regions with 30.9 percent of land sales.

Other highlights of the CCIM/Lan-dauer report are:

The retail sector, historically second only to offices in terms of activity, remained in the doldrums, with no regional mall transactions reported and the mean retail sales price below $11 million. The average price for offices, for example, was $45 million.

For the third consecutive quarter, the New England and Mid-Atlantic states led the nation in mean deal size with $49.5 million and $42 million, respectively. The region with the next highest mean deal size was the Pacific at just over $20 million.