Ten-X: Property Values Tick Upward in April

Commercial valuations increased 0.6 percent month-over-month in April, bringing them back above their year-end 2015 levels, reported Ten-X, Irvine, Calif.

Ten-X Chief Economist Peter Muoio said valuations increased 7 percent year-over year.

“Even though the April all-sector increase is significantly stronger than the prior month’s slight gain of 0.2 percent, this still is the slowest annual growth rate from pricing for the cycle,” Muoio said. “April’s uptick in growth was seen across all major commercial real estate sectors except for hotel, where that segment’s fundamentals as well as its pricing continue dwindling.”

Ten-X said hotel asset prices dipped 1 percent from March to April, marking the sixth consecutive monthly decline. Hotel prices exceed year-ago prices by just 0.5 percent. “As hotel fundamentals and pricing keep steadily worsening, so did occupancies in Q1, as supply exceeded demand for the first time this cycle,” Muoio said.

Meanwhile, other commercial real estate sectors prospered. Muoio noted that the apartment sector displayed the strongest pricing trends, gaining 1.8 percent in April. But despite that performance, the apartment sector is up just 8.9 percent year-over-year, its lowest reading since March 2015. “Apartment investors remain more cautious on cap rates than in past months, even while Google search trends and pricing on the Ten-X platform remain strong,” Muoio said.

After three straight monthly declines, Office prices reversed course in April, gaining 0.7 percent during the month for a 2.2-percent increase from a year ago when they reached a low for the cycle. “The April Office Nowcast was lifted by stronger pricing on the Ten-X platform, improved investor outlooks and stronger Google search terms,” Muoio said.

Retail and industrial valuations both saw April gains. Ten-X said the retail sector continued its steady climb with a 0.9 percent April increase, up 9.4 percent from a year ago. Industrial saw a more modest 0.4 percent April gain, though it remains a healthy 16.4 percent higher than a year ago–the strongest reading of any of the five CRE segments. “Investors continue with strong industrial expectations, and Google search trends remain supportive of pricing,” Muoio said.

Ten-X’s pricing index combines Google Trends data with Ten-X’s proprietary transaction data and investor surveys to forecast CRE pricing trends in real time.