CoStar Market Insight: Investors Gravitating to Value Add

CoStar Market Insight: Investors Gravitating to Value Add Sales of 150 W. Jefferson Ave. and Troy Tower Highlight the Trend By Amena Ali October 30, 2017 Email Print Close to 600 office sales finalized in the Detroit Metro over the last four quarters, and the most obvious trend among these sales was the propensity of developers to gravitate toward properties rated 3 Star or less. Such transactions accounted for over 95% of investment activity, and the inclination towards value-add transactions are a common occurrence among lower rated office assets. With major employers moving to the area, the pursuit of purchasing old buildings and adding improvements has proven to be a popular approach. The Troy Tower at 901 Troy Drive in Troy North Submarket is a good example of this trend. The roughly 125,400-square-foot, 3-Star building sold to Allegiance Realty Corp., a North Carolina-based investor for $9 million ($71.80/square foot). Like many recent transactions, the buyer acquired the asset to add cosmetic improvements both to the exterior and interior of the building, to further elevate the overall property value. The majority of these trades are clustered downtown or in surrounding submarkets where construction has picked up. Employers are moving to the area to secure high-end office space and to escape rising costs per in metros like San Francisco. This has prompted buzz in the community around existing and new office space. With ample existing office buildings many investors have looked to purchase buildings in high-demand areas. Assets in these areas, such as Downtown, have unsurprisingly resulted in higher priced sales. This can be seen with a recent transaction involving a downtown property. Earlier this summer, 150 W. Jefferson Ave. sold to Redico for $81.5 million ($166/square foot), the largest sale over the past four quarters. The 490,000-square-foot office was almost 90% occupied at the time of sale, with notable existing tenants such as KPMG, Paddock & Stone, and Starcom/Digitas. The existing parking structure was eyed for its potential to house a residential redevelopment project though no such plans have been formalized yet. CoStar Market Insights is a new feature providing a snapshot of recent real estate trends. The CoStar Market Analytics team monitors commercial and multifamily real estate across 206 metro areas, with a granular understanding of the projects, players and economic trends that move these markets. Learn how CoStar Market Analytics can add to your market knowledge, helping to minimize risk and maximize returns. GET IN TOUCH        Contact CoStar News Team:   News@CoStar.com More US National NewsBack to US National News PageHow Will Fed's Plan to Shift from Negative Rate Environment Impact Real Estate Valuations?Market Conundrum: CRE Investors Making Fewer Big Deals, but Raising More MoneyHundreds of Localities Fortify Their Amazon HQ2 Bids with Hefty Financial IncentivesStarwood IPO Signals Rising Interest by Big Money Managers in Small CRE Investors Newmark Knight Frank Operating Company Files for IPOStrategic Alliance in Experiential Retail Begins with WeWork Acquiring Lord & Taylor Flagship BldgXceligent Contractor Admits to Stealing CoStar Data, Judge Issues Injunction, Orders Firm to Pay DamagesNew High-Tech 'Sports Districts' Seen as Winning Strategy for DevelopersLatest Sign Points to Imminent IPO, Spin Off for Newmark Knight FrankSares Regis Buys Toyota's Former 2 Million-SF Campus in LA CountyBank Branches Still Matter Even as They Continue to Disappear» Go To National News Page