Foreign Buyers Flock to D.C. Office Market

Last year, foreign investors bought nearly 10 times as much commercial office space in the District as they did in 2006. This year, they're buying at a similar clip, paying top dollar for properties with prestigious addresses and blue-chip amenities.

Last week, a wealthy Irish investor broke D.C. real estate records when he bought the glass-clad, I.M. Pei-designed trophy property at 2099 Pennsylvania Ave. NW for a hefty $867 a square foot. Jones Lang LaSalle, which brokered the deal, had pitched the property to potential buyers in Europe, Australia, Asia Pacific and Latin America. Vico Capital outbid a group from Dubai, sealing the deal at $172.5 million. It bested by nearly $40 per square foot the city's last high-water mark: the sale of 1801 Pennsylvania Ave. NW in 2006 for $826 per square foot.

Until recently, many international buyers were reluctant "to enter a competition that included domestic buyers that were buying in large scale and had well-developed track records in those markets," Kevill said. With loans scarce, domestic investors cannot do deals with the speed they once had, when they could pre-fund their debt and perform little or no due diligence on target acquisitions. That gives foreign investors more time to familiarize themselves with the market.

Last month, while visiting Washington, a Dutch investment adviser struck up a conversation with real estate attorney Thomas Hart at the Four Seasons and asked about commercial real estate opportunities.

Hart pointed him to Penn Quarter, the Southeast Waterfront and the area north of Massachusetts Avenue known as NoMa as developing areas where property values are likely to rise.

"With the market down and the dollar down, they could get a double discount" on U.S. real estate, Hart said of foreign investors. "It just makes sense. To read more click here.

By Anita Huslin, Washington Post Staff Writer
Published Monday, April 21, 2008