Office building sales surging

Sales of office buildings in Boston are on pace to crush last year's record, driven both by the volume of the transactions and the high prices investors are paying.

"Although Boston has always been a prime market for savvy core investors, few would have predicted the pricing levels that have been achieved in the past six months," William Barrack, managing director at Jones Lang LaSalle, says in a report.

Last year, Boston's sales set a high-water mark, totaling $6.3 billion, the real-estate services firm found. In the first quarter of this year alone, the tally is already $5.6 billion. That number includes the 14 properties in Boston bought by Blackstone Group as part of its acquisition of Equity Office Properties Trust in February for $39 billion, including debt. Jones Lang LaSalle estimated the Boston buildings to be worth $3.1 billion.

Yet, even if the Blackstone deal is pulled out, 2007 deals will easily outpace those of 2006 if the pattern holds, which the firm expects.

Much of the demand for properties is based on the idea that Boston's rental rates are primed to rise. Large blocks of space are dwindling and new office buildings in the city aren't scheduled to open until at least 2010. Jones Lang LaSalle is already seeing a few leases at $70 a square foot -- a price unseen since the dot-com crash. (AP)