Blame it on the slim pickings investors have been facing. Blame it on the optimism real estate executives have been trying to maintain. Or blame it on fund managers needing to spend capital on deadline.

But whatever the cause, there’s no denying the facts – investment sales prices on commercial property have ballooned in the last year, according to industry insiders.

It’s true of high-profile assets and smaller properties alike. Several assets in the region were mark eted last year, whether publicly or privately, but landlords decided to keep many because bids from prospective buyers were too low.

But since the beginning of the year, those properties have come back to the market, and investors, dismayed at the lack of deals available in the last few years, have pounced. But that abundance of deal-seekers has caused prices to skyrocket – in some cases, more than 20 percent, according to commercial real estate executives.

Chasing Deals

“Acquisition capital, debt and equity, is plentiful and priced competitively,” said Scott Jamieson, managing director for Jones Lang LaSalle in Boston. “While transactions are coming back, we’re still far from a normalized marketplace in terms of volume. The debt side is priced very competitively … but investors are still frustrated with a lack of opportunities.”

Take, for example, the much-talked about deal for Unicorn Office Park in Woburn. National Development recently purchased the 640,000-square-foot office complex for about $80 million. According to industry sources, most observers expected the bids to be closer to $70 million. And more likely than not, the seller, a New York-based equity fund whose assets are managed by JP Morgan, held off last year because it could not have expected bids to be for more than the mid-$60 million range, sources say.

In Chelmsford, 150 Apollo Drive came to market last year, but the owner, a Wells Real Estate Funds REIT, decided to hold onto the property. Last year, bids on the 80,000-square-foot asset were in the neighborhood of $8.5 million, or $105 a square-foot. But when the 100 percent leased property was put up for sale again nine months later, it ended up selling for approximately $10 million, to Farley White Interests.

In Woburn, Colony Realty Partners offered its 275 Wildwood Ave. industrial asset to potential buyers last year and received bids in the $12 to $13 million range. They held off, and this year it sold to Cambridge-based Fairlane Properties for more than $16 million. It was also 100 percent occupied.

“There’s just so much capital chasing deals, and there are so few deals out there that there’s been a fairly significant increase in values that people are willing to pay for deals,” said William Gause, senior vice president and director of acquisitions for Leggat McCall Properties. “That’s definitely the case right now. Whether it’s a combination of expiring investment horizons and lack of other deals to put funds into, or a sense of optimism that rents will grow.”

Fundamental Shift

But there still exists a significant disconnect between the leasing environment and the investment sales market, since there has not been significant absorption on the whole in the area, Gause told Banker & Tradesman.

“Even so, a number of properties are trading at a significant premium over what they would have just a year ago,” Gause added. “People are frankly willing to take lower yields on the transactions. They’re banking on rent appreciation.”

And with job growth not occurring, most brokers interviewed are wondering when those rental increases will occur, besides in the Class A+ properties.

Still, at least one Boston forecaster expects office rents to rise in the near term. Real estate brokerage Marcus & Millichap has predicted that companies will expand their office-worker head counts in the second half of the year. A third-quarter report from the firm says 22,000 new white-collar jobs will be created in Boston in 2011, a two percent increase that will return the Hub to its 2007 employment levels. By the end of the year, Marcus & Millichap expects increased tenant demand will allow landlords to increase rental rates by roughly 3 percent, to $36.10 per foot, and cut concessions.

But have we seen this before? In 2010 there were some notable transactions early in the year that got the industry excited, and for a time it seemed the capital markets had gotten ahead of the broader recovery in terms of fundamentals, said one broker. But stubbornly high unemployment rates and other macroeconomic trends sapped some wind from those sails, and the end result was that potential buyers just couldn’t – or wouldn’t – submit sufficient bids to turn owners into sellers.

So far this year, fundamentals have continued to improve, though not at a robust pace. Improved market conditions, coupled with continued availability of attractive debt terms, have facilitated a number of transactions. And once owners see one property sold at a premium, others are usually not far behind in bringing properties to market.

“This year the market fundamentals have come back, albeit not robustly,” Jones Lang LaSalle’s Jamieson said. “And the capital markets have remained strong, which is driving an increase in cap markets activity.”