Developer offering Hub office condos at a steep discount

Average rent in city about 20% off market peak

Michael Rauseo bought 22 units at 185 Devonshire St. for $5.1 million. The remaining units were sold by the previous owner. (David L. Ryan/ Globe Staff/ File 2005)

In 2006, developer Michael Rauseo stirred downtown Boston's housing market with a rare auction of newly built condominiums in the Financial District.

Now, he's doing it again. But this time the condos are not for bargain-hunting home buyers. Instead he's pitching them to small companies searching for a deal on office space during the recession. Rauseo is offering discounted prices or lower rent for 22 office condos at 185 Devonshire St.

For example, a unit that was on the market for $1.1 million a couple of months ago is selling for $619,000.

For businesses looking to lease instead of buy, Rauseo is featuring free rent for the rest of the year.

"I was able to buy the building at a reduced price, and I'm passing along the savings to these customers," said Rauseo, who has been working in real estate for 20 years.

Two weeks ago, he closed on the purchase of 75 percent of the building from Bayview Financial, for $5.1 million. Bayview, based in Coral Gables, Fla., purchased the building's mortgage for nearly $15 million in 2005. It renovated the turn-of-the-century building, but was only able to sell 25 percent of the units.

So far, the building is attracting significant interest, according to Jeff Becker, who is marketing the property for the real estate firm NAI Hunneman.

"I'm heading over there to show it for the fourth time today," said Becker. "A lot of companies need this opportunity right now."

Other developers are also cutting deals to fill vacant space in a slow office market.

Average asking rents at top-rated Boston office buildings are now $56.66 per square foot, 20 percent off the market peak in 2007, according to DTZ FHO Partners, which represents tenants and landlords.

And as a so-called Class B building, 185 Devonshire must compete for attention with higher-rated office buildings where rents are falling fast. The building's units are also condominiums, a type of office space that has never been widely popular in Boston.

Chuck O'Connor, a partner at DTZ FHO, said Rauseo is taking the right approach in the current market, which he believes will turn quickly.

"People who acquire real estate right now are going to look pretty smart down the road," he said.

Casey Ross can be reached at cross@globe.com.