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Is the commercial real estate market getting back to normal?

A view of the John Hancock Tower from Boston's Back Bay neighborhood

TEXT OF STORY

Bob Moon: Here's a John Hancock that's too prominent to ignore: some new owners just put their signature on a big real estate purchase, closing the deal for Boston's landmark Hancock Office Tower. This just might signal a return to normalcy for the commercial real estate market. Or at least, it's a start. In some places.

Here's Marketplace's Janet Babin.


Janet Babin: The John Hancock Tower is to Boston what the TransAmerica Pyramid is to San Francisco. Babson College real estate professor Michael Harrity calls it an icon.

Michael Harrity: The John Hancock tower was, is the tallest building in Boston, a 60-story building with over 2 million square feet of space.

Boston Properties bought the lozenge-shaped glass tower for $930 million. That's about a third more than the sellers, Normandy Real Estate Partners and Five Mile Capital Partners, bought it for at a foreclosure auction. Before the auction, the building was valued at more than $1 billion.

Real estate partner Steve Horowitz at the law firm Cleary Gottlieb says the John Hancock valuation was typical.

Steve Horowitz: During the middle years of the decade, most people in the real estate market had drunk the Kool-Aid. Everybody was believing that values would continue to go up.

Horowitz says values didn't go up and the owners at the time got saddled with too much debt. Real estate analyst Paul Adornato at BMO Capital Markets says that the sale happened at all signals a return to optimism.

Paul Adornato: Because what we saw really since the beginning of the financial crisis is that real estate transactions have essentially dried up.

But this was the sale of a landmark tower in a gateway city on the coast. The rest of the country may have to wait a bit longer for some real estate love.

In New York, I'm Janet Babin for Marketplace.

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