CRE Prices Advance in July

Commercial real estate asset prices grew in July, Real Capital Analytics, Green Street Advisors and CoStar said in separate reports.

RCA said its National All-Property Composite index rose 1.2 percent in July–the strongest monthly gain since May. The index is up 7.9 percent from a year ago.

“Prices in July rose even as deal volume declined sharply,” RCA said.

Green Street Advisors Commercial Property Price Index also inched higher in July. “Some property types are doing better than others, but, in aggregate, pricing has flattened out recently,” said Green Street Senior Analyst Peter Rothemund. “Industrial, apartment and life-science values have moved higher over the past few months, while retail and storage have declined.”

CoStar, Washington, D.C., tracks pricing data in two ways. Its value-weighted pricing index reflects larger asset sales common in core markets while its equal-weighted index reflects more numerous but lower-priced property sales typical in secondary and tertiary markets. Both CoStar indexes advanced 1.2 percent in July.

CoStar noted transaction volume fell slightly from a year ago. Composite pair volume equaled $130.3 billion in the 12 months ending in July, down 1.6 percent from the previous 12-month period ending in July 2016. This drop reflects a continued “modest” deceleration in capital flows from the record-setting levels of the past two years as the commercial real estate market has matured, CoStar said. “That being said, the composite pair volume for the 12 months through July 2017 remains among the highest on record for the index, reflecting continued robust transaction activity,” the report said.

RCA said every property type index rose month-over-month in July. Suburban office grew the most at 1.9 percent. Central business district offices–which experienced the second-strongest price growth since 2007–posted the most sluggish growth of the property types in July, just 0.2 percent. Retail, the only property type registering annual declines, reversed course grew in July and grew 1.2 percent month-over-month.

RCA noted the six largest metros grew 1.1 percent from June to July while non-major metros grew 1.3 percent. This represents the second time in 2017 that monthly growth in the non-major markets outpaced the largest markets; in 2016 this trend was more common.