The average value of office space increased 1.2 percent to $134.13 a square foot, from $132.52 in the second quarter, according to the survey of the top 50 U.S. markets prepared for The Wall Street Journal by Reis Inc., a New York-based real-estate research firm. That helped confirm that a 0.1 percent increase in the second quarter — the first positive movement in more than a year — wasn't just a blip.
But the disparity between actual sales and the underlying value of offices continued to increase, with properties selling at a 25.3 percent premium over their values. With a report out recently that showed the highest wholesale inflation increase in nearly 15 years, that could spell trouble down the line, says Lloyd Lynford, chief executive of Reis.
Capitalization rates — the estimated rate of return at the time of a property's purchase — continued to plunge as investors were willing to take lesser returns for the perceived stability of real-estate assets. In the office market, capitalization rates went down to 7.9 percent in the third quarter, from 8.1 percent in the second.
