Argos has sold Suite 605 at 1950 Abbott St., in Camden Square Village West for $327,500. While the full asking-price sale represents just a little over $180 per SF for the roughly 1,800 SF office condominium, what it suggests is perhaps more important; an approach toward equilibrium in the market and true market appreciation for midtown office space.
Many small businesses were hit hard during the downturn, which impacted smaller space pricing significantly. Foreclosures and distressed sales took a toll on many small office condominium projects. Add in distressed unit owners unable or unwilling to pay association dues, and it’s easy to see how a stable project can become fragile quickly.
The lack of volume in “market” transactions, where both buyer and seller are equally motivated, has had a big impact on property valuations by appraisers. When appraisers have a difficult time finding recent comparable property sales in reviewing a proposed transaction, the result can be a conservative hedge on valuation. We’ve had several buyers in the past 12 to 18 months willing to pay a seller’s price, only to find out that the property didn’t appraise.
When a property that is being financed doesn’t appraise, a buyer and seller have a couple options. First, the seller may reduce the contracted purchase price to meet the buyer’s loan-to-value . If the seller is unwilling to lower its price, the buyer can commit additional cash at closing to keep within its lender’s underwriting limits. Unfortunately, while credit markets have eased and small companies have become more confident in making major decisions like moving, cash constraints have continued to be an impediment to small office deals.
We’re now seeing good volume in transactions, which allows for more data, benefitting appraisers, buyers and sellers alike. We’re also seeing true appreciation in pricing, much of which is being fueled by a lack of new inventory. These two factors make for a more robust market.