Commercial Property Prices Rise Slightly, Volume Moderates

Commercial property price indexes rose slightly in October while transaction volume moderated, analysts reported.

Real Capital Analytics’ U.S. National All-Property Index rose 1.2 percent during the month to a point 8.4 percent higher than a year ago. The RCA index has registered monthly gains of 1.0 percent or higher since June following smaller increases early in the year.

“While prices have maintained a steady pace of growth, deal volume in the U.S. has fallen in four of the past five months,” RCA said, noting a 23 percent year-over-year decline in transaction volume for all property types in October–the largest since January.

Apartment price growth has slowed, RCA said. After a slow start to the year, the apartment sector gained momentum from May through August before slowing to a 0.9 percent growth rate in September and 0.7 percent in October.

Industrial asset price growth topped apartments in October with the fastest year-over-year growth, RCA noted. The industrial index is up 9.9 percent year-over-year. Strong growth in the industrial sector has continued to push the market forward while other core types cool,” the report said.

Green Street Advisors Senior Analyst Peter Rothemund said prices have plateaued in aggregate, “but it’s really a mixed bag when it comes to property pricing these days,” he said. “Industrial, medical office, life science–they’ve all done great over the past year. Malls have been weak. And everything else has been somewhere in between.”

CoStar, Washington, D.C., said its two price indexes showed little change in October. The firm’s value-weighted index, which reflects larger sales transactions in core markets, edged up 0.5 percent in October, contributing to a gain of 4.9 percent for the 12 months ending in October. CoStar’s equal-weighted index tracks the more numerous but lower-priced property sales typical in secondary and tertiary markets and was also relatively flat, edging down 0.5 percent but still showing a 14.2 percent gain for the 12 months ending in October.

CoStar also noted slowing transaction volume. Composite pair volume of $128.5 billion in the 12 months ending in October was 4.2 percent lower than the previous 12-month period, suggesting that capital flows have moderated from the record-setting levels seen in 2015 and 2016. “However, property sales remain elevated as the annual sales volume through October 2017 was still among the highest on record,” the report said.