CRE Prices Rise 1.1 % in July

_{The office, apartment and retail sectors drove commercial real estate prices higher in July, reported Ten-X, Irvine, Calif.}

_{Ten-X said commercial valuations increased 1.1 percent in July, marking the strongest monthly increase this year and a 5.2 percent year-over-year gain.}

_{“This recent string of monthly increases confirms that overall pricing of commercial real estate remains on the upswing following the weakness seen earlier this year,” said Ten-X Chief Economist Peter Muoio.} 

_{CoStar, Washington, D.C., noted that CRE prices resumed their healthy growth in the second quarter after experiencing “modest” growth in first-quarter 2016 following global economic uncertainty early in the year. “Both national composite price indices ended the second quarter of 2016 on a stronger note as investor confidence rebounded,” the firm’s pricing report said.} 

_{CoStar’s value-weighted price index, which tracks large asset sales, advanced by 3.3 percent in the second quarter while the research firm’s equal-weighted index, which reflects more numerous smaller-property sales, rose 2.1 percent.}

_{But Muoio noted distinct differences across the five major property sectors, “with each telling its own story,” he said.}

_{Apartment property prices–which have posted the most consistent gains this year–increased 1.1 percent in July, yielding a 6.8 percent jump above last year’s level, Muoio said.}

_{“The apartment sector is unencumbered by technology-driven shifts that have impaired demand for many other property segments and has long-term demand potential represented by a myriad of social changes that are currently favoring renting,” Muoio said. “Our survey results show a very positive outlook towards the segment among investors.”}

_{Retail pricing continues to show far more strength than underlying fundamentals, Muoio noted. The sector posted a modest 0.5 percent increase in July. “While surveys indicate bullishness toward the segment, buyers on the Ten-X platform appear to be warier, marking a shift from previous months of stronger retail pricing,” Ten-X said.} 

_{The hotel sector held steady in July following a 7.6 percent drop between November and June. Hotel fundamentals have weakened due to increasing supply, weak economies abroad, a stronger dollar and competition from online marketplace AirBnB, Ten-X reported.}

_{Industrial was the only segment to see a price decline for the month, Ten-X reported, the third consecutive drop for this formerly white-hot property sector. Industrial real estate prices declined 1.2 percent from June, its weakest month since 2011.} 

_{But the sector still saw the strongest annualized growth rate of any property segment, Muoio noted. “Despite the falloff in trade and weakness in energy-related industrial demand, the industrial sector has sustained gains spurred by the demand for distribution and fulfillment centers needed for the fast growing e-retail businesses,” he said. “That said, this recent pricing weakness may reflect wariness among investors as to whether this positive roll can continue in the longer term.”}