CRE Prices Increase Slightly

Commercial real estate property prices rose slightly in September–and throughout the third quarter–Real Capital Analytics and CoStar said in separate reports.

Real Capital Analytics, New York, said its national all-property index rose 1 percent in September, marking the fourth consecutive month with at least 1 percent price growth.

“The trend stands in contrast to overall transaction volume, which dropped in September versus a year ago–continuing a pattern of flat-to-falling activity,” RCA said.

CoStar, Washington, D.C., agreed that transaction volume has continued to level off. Composite pair volume equaled $128.7 billion in the 12-month period ending in September, down 4.3 percent from the 12-month period that ended in September 2016. “This suggests that the moderation in transaction activity that began in 2016 from 2015 record levels is continuing in 2017,” CoStar said.

Each property-type index rose in September, RCA said. Apartments grew the most at 1.1 percent. Apartments also logged the largest year-over-year increase at 10 percent.

Industrial property prices followed apartments with a 8.2 percent year-over-year increase. “Investor enthusiasm for the [industrial] sector is reflected in healthy activity and persistent price increases,” RCA said.

Retail continued to lag behind other types, edging up only 0.8 percent year-over-year, RCA reported.

“It’s really a mixed bag when it comes to property pricing these days,” Green Street Advisors Senior Analyst Peter Rothemund 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 said its composite price index shows “slow, steady growth” in the third quarter. It noted that pricing trends for general commercial and investment-grade properties continue to diverge.

The CoStar equal-weighted index increased in the third quarter, but at a slower rate–1.2 percent compared to 4-plus percent on average over the preceding four quarters. The equal-weighted index is weighted toward smaller lower-end properties. The firm’s value-weighted index, which reflects higher-value trades, advanced by just 0.9 percent in the third quarter, down from a 1.5 percent average quarterly growth rate in the previous four quarters.