Ember Grummons, JP Raynor and Steve Farrell recently teamed up to sell the last two office buildings developed and owned by KVI at North Park for $22,403,000. Combined, Buildings 7 and 8 contain 177,323 square feet and were fully leased at the time of the sale.

Our newsletter readers know that North Park has gone through somewhat of a transformation over the past ten years. In 2007, the office park was 100% leased, and six of the office buildings were sold for a 7.5% capitalization rate. During the ensuing recession, several larger tenants moved out, the buildings were in need of renovation and the vacancy rate for office space in the park rose to 40%. It took some time to work through the rejuvenation and releasing. Today, there is still some turnover occurring in the park, but due to the lack of large available spaces in the market, the time needed to backfill is shorter and the lease rates are at better market rates — though still not quite back to the rates achieved in 2007.

Another interesting factor is the change in capitalization rates for multi-tenant office buildings. After the 2007 North Park sale, capitalization rates for larger Class B multi-tenant office sales rose significantly, reaching a peak of 10.67% with the sale of North Park Buildings 4 and 5 in February of 2017.

Multi-tenant office capitalization rates seem to be compressing due to more buyers being in the market. Buildings 7 and 8 traded for a capitalization rate almost 200 basis points lower than Buildings 4 and 5 traded for just 18 months earlier. Buildings 7 and 8 also commanded higher prices per square foot, closing at $126.34 per square foot, vs $103.75 per square foot for Buildings 4 and 5