April Commercial Property Prices Grow, Volume Drops

Real Capital Analytics, New York, said commercial real estate prices have not yet been decimated by the COVID-19 pandemic–but volume certainly has felt its effects.

“While transaction prices have not yet been pounded by the Covid-19 upheaval, acquisition volume has,” said RCA Senior Analyst Wyatt Avery. He said April sales activity across property types sank 71 percent from a year earlier after a 17 percent year-over-year decline in March. Despite this, the firm’s national all-property price index gained 0.5 percent during April.

Avery noted price growth slowed for the industrial sector, continuing a trend that started before the pandemic shuttered the U.S. economy. Industrial prices gained 8.3 percent year-over-year, down from the 12.2 percent rate seen last July. Apartment prices rose 10.8 percent in April from a year ago.

CoStar, Washington, D.C., said both its price indexes showed “modest upticks” in April as deals started prior to the pandemic were consummated. The firm’s equal-weighted CRE price index, which tracks numerous but lower-priced property sales typically seen in secondary and tertiary markets, increased 0.1 percent in April, while its value-weighted index of larger asset sales commonly seen in core markets rose 0.5 percent.

“April price growth was the slowest so far in 2020,” the company’s Commercial Repeat Sale Indices report said, noting there is significant impact from COVID-19 that has not yet been captured in pricing.

CoStar said deals reported in the weeks after month-end are still being tallied, but sales volume through the first four months of 2020 was down 7.5 percent as investor caution tamped down deal activity. The average time on market for for-sale properties increased in April to 202 days, up from 197 days in January 2020, CoStar reported. This 2.4 percent increase over the four-month period is the biggest increase in time on market since 2012. The percentage of properties withdrawn from the market by discouraged sellers held steady at 26.5 percent in April.