CRE Prices Grow 0.7% in September

U.S. commercial real estate property price growth remained on its relatively consistent pace in September, reported Real Capital Analytics, New York.

RCA said prices increased 0.7 percent in September and 7.2 percent from a year ago, led once again by growth in the apartment sector.

“Price trends in September continued on the relatively consistent path that has been shown throughout 2018 so far,” said RCA Analytics Manager Elizabeth Szep. “Growth in national prices is being driven by gains in the non-major metros and there is a wider variation in growth patterns among property types this year compared with 2017.”

RCA noted the apartment sector is the only property type still posting double-digit annual price growth. Apartment prices rose 0.5 percent in September and are up 10.7 percent year-over-year. Deal volume in the apartment sector has increased 12 percent for year-to-date 2018 compared with the same period a year ago.

Transactions of single apartment assets, often considered the most telling measure of market health, set a record for the year to date, RCA said.

Suburban office asset prices increased 0.4 percent in September and are up 8.8 percent from a year prior, Szep said. “Annual price growth for the suburban office sector has accelerated each month since the start of 2018 as investors move out of more highly priced downtown areas in search of yield,” she said. “Single-asset sales in the suburban office market are on pace to hit a record high level of deal activity in 2018.”

By comparison, central business district office prices rose just 2.7 percent year-over-year in September, RCA reported.

Looking at quarterly data, CoStar, Washington, D.C., found similarly steady gains. The firm’s value-weighted index, which reflects larger asset sales in core markets, rose 1.0 percent in the third quarter while its equal-weighted index, which tracks lower-priced property sales typically seen in secondary and tertiary markets, was up 2.2 percent.

CoStar said sales volume remained “brisk” through the third quarter. Composite pair volume increased 5.3 percent from the 12-month period ended in September 2017. “The lower end of the commercial property market had more momentum in terms of sales volume, the report said.