Property Prices Rise in November

Commercial and multifamily property prices both continued their rising trends in November, a pair of reports said. 

Moody’s and Real Capital Analytics, New York, said core commercial prices rose 1.5 percent during November, while apartment sector property prices increased 1.1 percent.

Peter Rothemund Senior Analyst with Green Street Advisors, Newport Beach, Calif., said most property prices gains occurred in the year’s first half. “Values have been relatively flat since,” he said. “Price appreciation has really slowed down over the past several months.” 

Rothemund noted that the price growth slowing has happened across property types. “Even self-storage–where prices were rising at a double-digit annual clip–has seen price appreciation come to a near stop,” he said.

Suburban office properties and retail properties now represent the only sectors where prices remain below their pre-crisis peaks, down 4.8 percent and 0.7 percent respectively from their peaks. But suburban offices showed the strongest price growth over the last three months, up 5.5 percent, Moody’s said.

Smaller market price growth outpaced major-market growth by nearly a full percentage point over the past 12 months, Moody’s reported. Prices in non-major markets increased 9.8 percent while major-market prices rose 8.9 percent.

CoStar, Washington, D.C., reported that its both of its price indexes advanced in November. The firm’s value-weighted index, which tracks large higher-quality assets, advanced 1.3 percent in November to a point 28 percent above its pre-recession peak, while its equal-weighted index, which tracks smaller property sales, rose 1.1 percent and now stands 3.2 percent above its former peak, set in August 2007.

Demonstrating healthy overall demand for commercial property space, net absorption across the three major property types–office, retail and industrial–could reach nearly 680 million square feet for the 12-month period ending in December 2016, CoStar said. This would represent 1.5 percent increase from the same a year ago.

“Demand from tenants leasing space has supported the extension of the pricing recovery,” CoStar said, noting that smaller properties showed the strongest absorption growth over the 12 months ending in December. Meanwhile, net absorption in the larger investment-grade properties is projected to decrease 7.6 percent in the same period.

Transaction volume trailed 2015’s strong pace through much of 2016–likely reflecting broader financial market volatility from early in the year–CoStar said. But sales activity picked up in November, resulting in $113.3 billion in year-to-date sale volume through November, a 0.8 percent increase compared to the same period one year earlier.