The Cost To Build A New Suburban Class A Office Building And Why Prices Are So Low

I have recently interviewed a number of office building experts and for suburban Class A office buildings in the Walnut Creek/Concord, Northern California region the cost to build a brand-new Class A office building is $500-700/square foot. This price includes land, architectural, permits, construction of the base building, parking structure, all the soft costs like permits, fees, the cost of tenant improvements and lease-up expenses. In Concord today there are several Class A, well-located office buildings expected to sell for $70-120/square foot. Why such a bargain price? These buildings require substantial lease-up to secure new tenancies, with tenant improvements and leasing fees costing $75-125/rsf. The buildings might also require common area upgrades which could add another $50-100/rsf. The effective rent for this area s $24-30/rsf per annum, full-service, and when you deduct the cost of all the building services of PG&E, water, sewer, property tax and insurance, janitorial, maintenance, property management and on and on the actual net rent might only be $10-14/rsf per year. This is less than many warehouses in our area rent for! With office vacancies expected to remain high for years to come due to corporate downsizing and the slow return-to-office, it is no wonder buildings are selling for such a low value. Of course, if you want in on the action please contact me and I will cheerfully represent you in purchasing one of these bargains!  Jeff.weil@colliers.com