Commercial, Multifamily Prices Grow in August

Commercial and multifamily property prices both continued their rising trends in August, analysts said. 

“The latest increase…reflects further gains in the apartment and core commercial components, with price gains in the apartment segment outpacing those in core commercial,” said Tad Philipp, Director of Commercial Real Estate Research with Moody’s, New York. 

Moody’s and Real Capital Analytics reported that core commercial property prices rose 1.0 percent during the month while apartment property prices increased 1.3 percent. 

CoStar, Washington, D.C., called commercial real estate prices “resilient” since they overcame relatively sluggish economic growth in early 2016. “The business cycle continues to advance through the seventh year of the current recovery cycle,” CoStar’s Commercial Repeat Sale Indices report said. 

Both of CoStar’s major indexes made steady gains during the month. Its value-weighted index, which reflects higher-value sales, advanced by 1.1 percent to a point 25 percent above its previous cyclical high. The equal-weighted index–which reflects smaller, lower-end property sales–edged upward 0.3 percent to within 0.5 percent of its pre-recession peak.

Central business district offices saw the most growth over the past three months, Philipp said. This segment’s prices have grown nearly 8 percent in the last three months alone, largely reversing declines from late last year and early this year.

But the retail segment price growth saw “lackluster” price growth in the past three months at less than 1 percent, Moody’s reported. All other index components–suburban offices, multifamily, hotels and industrial–grew by at least 2 percent over the same period.

Peter Rothemund, Senior Analyst with Green Street Advisors, Newport Beach, Calif., called 2016 property price changes “uneventful” for the most part. “Cap rates haven’t really moved and fundamentals continue to hum along,” he said.

Rothemund said he observed pricing movements in some sectors, however. “Pricing in the niche self-storage and manufactured home sectors has been hot this year, while lodging and senior housing have seen prices weaken a bit,” he said.