Industrial Assets Lead CRE Price Growth

Real Capital Analytics reported commercial property prices rose 6.5 percent in June from a year earlier, led once again by industrial assets, which increased at their fastest rate since early 2015.

The RCA U.S. National All-Property index gained 0.9 percent in June.

Real Capital Analytics Senior Analyst Wyatt Avery said industrial was the only property type to log increased annual growth in June, up to 13.3 percent. “Investor demand for the sector has been robust, but finding the right assets has proven challenging,” he said. “Industrial sector sales volume dipped in the first six months of 2019 compared with a year ago.”

But Avery predicted industrial deal volume will likely rebound later in the year, noting several multibillion-dollar entity-level deals already announced.

Green Street Advisors Managing Director Peter Rothemund agreed investors have favored the industrial asset class lately. “And pricing on Blackstone’s acquisition of the GLP portfolio [in an $18.7 billion transaction announced last month] suggests cap rates have continued to move downward of late.”

RCA said apartment prices grew 7.3 percent from a year ago, a healthy return, but well short of the 12 percent-plus gains the sector saw this time last year. “Price growth has steadily ebbed since the start of 2018, even as sales volume hit a record high in the first half of 2019,” Avery said.

Annual office price growth slipped to 4.0 percent in June, with suburban office prices registering only a 3.1 percent gain, RCA reported. Central business district office prices aided the index with a 7.6 percent year-over-year increase, up from just 2.4 percent a year ago.

The retail sector continues to lag other CRE sectors with just a 1.6 percent year-over-year growth rate in June, RCA said.

Across sectors, the gap between price gains in the six largest metros and smaller metros narrowed in June, RCA said. Price growth in the six largest metros quickened to a 6.2 percent year-over-year pace while non-major metro prices rose 6.6 percent, hovering near the same rate seen throughout 2019 so far.