USA: Timber Tops the Market says T3 Developer

7 November 2023

Mass Timber Is Proving Its Value – There’s growing evidence that mass timber buildings are providing a strong return on investment when it comes to higher building values and commanding above-market rental prices. Near the front of the pack is Hines, a global real estate investment, development, and property management firm that invested in a series of tall mass timber office buildings dubbed T3, with outposts completed and planned across the United States and around the world. And its investment is paying off: “If we just look at the performance of our timber office buildings when we pro forma them, we were thinking that the rents would be basically right in the middle of traditional class AA creative office buildings,” said Steve Luthman, CEO of the U.S. Midwest and Southeast regions and Canada for the developer Hines, in an interview for a CBRE podcast. 

Instead, “what we found in both Minneapolis and Atlanta is that our rents are at the very top of the market. We’re getting the same rents as the top of traditional class AA buildings in the city.” What’s more, Luthman said Hines sold T3 Minneapolis at a 3.75% cap rate in a market that rarely drops below 6%—meaning the project sold for a higher value than the market and project type would typically dictate.

And it’s not just Hines that is seeing gains as mass timber goes mainstream. In Atlanta, Sage Software is setting records with the $70-per-square-foot deal it signed at Ponce City Market’s under-construction 619 Ponce timber loft office (pictured above), according to the Atlanta Business Chronicle. That is far above the BeltLine Eastside Trail’s average office-space rents of roughly $49.98 per square foot—some of the highest in town, according to first-quarter data from Cushman & Wakefield—and sets a new peak for the city. The four-story, mass-timber office building offers 85,000 square feet of office space, with 25,000 square feet of retail. As designed by Handel Architects, 619 Ponce is expected to be completed in 2024.

The performance of these and other mass timber projects demonstrates that investors and tenants are increasingly recognizing the value of mass timber’s sustainability, low carbon footprint, and ability to create a warm and welcoming environment for the people occupying the building. 

Click here to listen to the podcast. 

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