Paramount Group has entered into a definitive agreement to sell 2099 Pennsylvania Avenue, a 12-story, 208,776-square-foot, class A office building in Washington, D.C., for approximately $220 million. The transaction, which is subject to customary closing conditions, is expected to close in the third quarter of 2018.
The buyer was not disclosed.
“Since our IPO, we have been creating value at 2099 Pennsylvania Avenue by increasing leased occupancy to 98.5 percent from 31.6 percent. With this sale, we are harvesting that value,” said Albert Behler, chairman, CEO and resident. “This transaction is a prime example of our approach to create shareholder value. In this instance, our strong leasing team converted an asset with large blocks of vacancy into one of the best class A properties in the Washington, D.C., market valued at over $1,050 per square foot.”
While still projected to easily surpass the annual historical average, job growth across the Washington, D.C., metropolitan region cooled off in the second quarter of 2018, according to Cushman & Wakefield. A total of 23,500 non-farm jobs have been added through May 2018, although nearly 80 percent of those were in January and February alone.
During the second quarter of 2018, more than 2 million square feet of class A product to the market at six sites across the city. This is the largest quarterly total of new deliveries in Washington, D.C., history.
Year-to-date new leasing activity at midyear 2018 registered nearly 2.9 million square feet roughly in line with Washington, D.C.’s 10-year market average.
In contrast to investment trends over the past eight years, more class A than class B structures were traded in the 12-month period ending in March. Many of these transactions were for premium properties located along the Dulles Corridor, according to Marcus & Millichap. The average price was $240 per square foot.
The number of trades taking place within the District grew by 42 percent year over year. Capitol Hill, Downtown and Georgetown are still the most active D.C. investment submarkets, representing 97 percent of the area’s deal pool. At an average sale price of $585 per square foot, these are also some of the most expensive submarkets in the metro.
Foreign investment is a major component of office transactions in the market. Approximately 37 percent of 2017 sales crossed international borders, including investments of over $600 million from buyers in South Korea, Singapore, Japan and Canada.
