Investment sales volume in DC’s office capital markets in 2015 was at near peak levels. While the great majority of investment activity has taken place outside of Capitol Hill over the last five years, three transactions comprised almost 30% of the total investment volume, the largest being the America's Square asset, which sold for $508M (a record $1,083/SF).
While that deal was unique (more on that later), it does validate the investor demand for Capitol Hill. However, opportunities are as scarce as bipartisanship among lawmakers.
JLL capital markets senior managing director Bill Prutting says investors are seeking cash flow return and are aggressive for best-in-class assets. If there are investment opportunities within walking distance to Metro that have strong nearby and in-building amenities and long-term credit leases, “there is a large buyer pool—and those investment opportunities are rare, but can be found in Capitol Hill."
Moreover, unique properties on Capitol Hill with views or points of difference, such as the redevelopment of the Hine School at 700 Pennsylvania Ave SE, will attract foreign capital. The challenge that the DC market faces right now—across every submarket—is that there are few investment opportunities and multiple competitive bids for every deal.
Sage Capital Advisors senior director Andrew Asbill sees the same scenario. Trophy assets on the Hill are scarce and worldwide investor demand is very robust.
Andrew says he saw that firsthand when Sage Capital last year, working on behalf of Ralph Dweck, sold America’s Square (above), a two-building complex with almost 462k SF at 300 New Jersey and 51 Louisiana Ave, to German fund Jamestown for the highest price per SF ever paid for DC office space, Andrew says.
“It’s unlike any other asset in the District, in my opinion,” Andrew says.
The latter building was constructed in the 1930s and the former in 2009, creating a linked complex that combines Art Deco with contemporary glass design. The complex was 97% leased when it sold.
International law firm Jones Day occupied several floors with nine years remaining on the lease. Other tenants included Comcast NBC Universal.
In addition, it has spectacular views of the Capitol that can never be blocked by new construction—and that is the jewel in the Capitol Hill crown.
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