A new office complex is being planned in Santa Monica, where international developer Hines just purchased a shuttered industrial plant on Olympic Boulevard.

The Houston-based builder paid more than $75 million for the property, according to a real estate expert who asked not to be identified because terms of the deal were confidential. The seller was a family trust that had held the land since the 1950s.

Hines hopes to build two- to four-story office buildings totaling about 300,000 square feet on the 7-acre site. It is at the northeast corner of Olympic and 26th Street, said Colin Shepherd, a Hines senior vice president.

Investors Bet on Chicago to Duplicate Gains
The Chicago office market’s long-awaited recovery has finally arrived as vacancies are declining and rents are increasing. Investors who snapped up buildings during the market’s downturn in 2004 and 2005 are now receiving premium prices for their properties. Of the 114 Chicago-area office properties that have traded this year, 20 were acquired when the market was at its weakest in 2005. Those were purchased for $728 million and have since re-traded for a total of $1.3 billion, representing an increase in value of 44%.

Blackstone Driving Rents Upward in Boston
Blackstone Group is driving office rents upward in Boston. The company has recently signed tenants to leases at $90/sf at One Post Office Square and Rowe’s Wharf, Boston properties that it picked up in its acquisition of Equity Office Properties Trust earlier this year. The rates compare to averages of $62/sf in Boston’s Back Bay area and $56.25/sf in the financial district. Rents in those markets increased 56% and 42% respectively over the past year, and area brokers say that rents of $80/sf and more are becoming more common.

Realty Investing Remains Strong
Commercial real estate investing continues to boom while fundamentals weaken, according to the National Association of Realtors. A record $157 billion was invested in commercial property, excluding the hotel sector in Q1 2007, which was up from $97 billion in Q1 2006. NAR expects property fundamentals “to remain basically sound,” but its analysis of individual sectors predicts that gains in average rents this year will decline from last year’s pace in all sectors except industrial, and that net absorption will drop in all sectors but retail. It also predicts that vacancy rates will increase slightly in office and retail, while they remain flat in multifamily and industrial.

Commercial Lenders See Hike in Originations
Commercial mortgage origination volumes during Q1 2007 ran 37% ahead of the same period last year, according to a survey by the Mortgage Bankers Association. That increased volume was driven in large part by the acquisition of REITs, including Blackstone Group’s $38.7 billion acquisition of Equity Office Properties Trust, which resulted in some $31.2 billion of financings. Of the major lenders, conduits or securitized lenders saw a 61% increase in volume in Q1 ‘07, while agency lenders such as Fannie Mae and Freddie Mac saw a 22% increase. When compared to Q4 ‘06, historically the most active quarter of any year, Q1 ‘07 saw a 15% decline.