A $2.1 billion-sale of five Boston-area office buildings to a Canadian investment firm has capped a historic shift in the region’s office market as the city’s skyline attracts a flurry of investment by large US and foreign investors.
Oxford Properties Group, an investment manager for the government of Ontario, this week became the latest international firm to acquire major office properties being unloaded by Blackstone Group of New York.
In one of the largest deals in the history of the Boston market, Oxford purchased buildings at 100 High St. and 125 Summer St. and partnered with JP Morgan Chase & Co. to buy towers at 60 State St., 225 Franklin St., and One Memorial Drive in Cambridge. Separately, Morgan Stanley purchased another Blackstone property at Rowes Wharf.
“This is a huge transaction for Boston,” said Frank Petz, a managing director with the commercial real estate firm JLL.“It really validates the city as a first-tier real estate market.”
An Oxford executive declined to comment, but a representative of Blackstone confirmed the deal is moving forward.
The sale price equates to an average of $650 per square foot, a premium price in a market where properties typically trade for $500 to $600 per square foot.
Since bottoming out in 2009, commercial real estate in the city has experienced a steady uptick in rents, reflecting greater demand for office space from a variety of industries, including technology, life sciences, and financial services.
‘This is a huge transaction for Boston. It really validates the city as a first-tier real estate market.”’
Commercial real estate in Boston has long been dominated by local players, such as Beacon Capital Partners and Boston Properties, but the city has increasingly attracted foreign and large US investors who see a growing economy and the potential for significant increases in rents in coming years. While prices have increased in recent years, Boston remains a bargain relative to markets such as London, New York, Hong Kong, and Beijing.
Oxford emerged as the winning bidder for Blackstone’s buildings from a large pool of international buyers that included GIC, an investment arm of the government of Singapore; HKMA of Hong Kong; and Norges, the central bank of Norway.
Norges previously purchased a large stake in Boston’s One Financial Center.
The sale of the five buildings was handled by Eastdil Secured, a New York investment bank, and the real estate firm Cushman & Wakefield. Cushman had been marketing 225 Franklin St., which generated huge interest among buyers and helped lay the groundwork for the larger deal.
In a marketing brochure used to help generate interest in Blackstone’s property, Eastdil noted both Boston’s relatively low 10 percent office vacancy rate and the migration of more than 23 companies into the city in 2013 alone.
In addition to attracting more foreign investment, the deal helps to further diversify ownership of the Boston office market, which in recent years has been controlled by a handful of major firms such as Blackstone and Boston Properties.
Other Blackstone assets in Boston have been sold to Shorenstein Properties of New York and San Francisco and a joint venture of Rockefeller Group and Mitsubishi Estate Co.
Shorenstein purchased 1-3 Center Plaza; Rockefeller and Mitsubishi bought 28 State St.
“This is going to foster competition, and competition is better for the consumer and healthier for the market as a whole,” said Gregory Vasil, chief executive of the Greater Boston Real Estate Board, a trade group. “It also reaffirms that Boston is a very desirable place for people to be.”
Blackstone still owns several large office buildings in the area, including 222 Berkeley St., 500 Boylston St., and the office space at South Station.
It acquired its Boston portfolio as part of its purchase of the commercial landlord Equity Office Properties Trust in 2007 for $39 billion.
That deal gave the company control of about 12 million square feet of office space in the Boston area, but it has steadily sold its holdings here over the last several years, capitalizing on rising rents and the increased interest from US and foreign buyers.
Blackstone has also sold Wellesley Office Park, New England Executive Park, and other buildings in Newton, Burlington, and Cambridge.