CRE Property Prices Climbing Again

Illustration courtesy of Real Capital Analytics

Commercial property price appreciation is comparable to that seen before the country’s initial Coronavirus lockdown last year, reported Real Capital Analytics, New York.

RCA Senior Analyst Wyatt Avery said the annual pace of commercial property price growth reached 6.8 percent in February. The firm’s National All-Property Index rose 0.9 percent in February alone.

The office index increased 2.0 percent year-over-year in February, Avery noted. “Prices in the office market have slowly crept back from the middle of last year when the index was flat, but are still only increasing at half the rate seen a year ago,” he said. Suburban office prices boosted the office index by gaining 2.2 percent year-over-year.

“The retail sector was again the only major property type with declining prices,” Avery said. The sector’s index has dropped 1.4 percent over the last year. Apartment prices rose 7.2 percent annualized, a growth rate similar to that pace seen over the last seven months.

Industrial sector prices rose the fastest in February, up 8.1 percent year-over-year, RCA reported. “Investor interest in industrial property has jumped because of logistics demand and, more recently, demand for cold storage space,” Avery said.

Green Street, Newport Beach, Calif. reported Wednesday its price index of real estate investment trust-owned properties increased by 1.4 percent in March. The firm’s all-property index is up 2.5 percent this year to a point just 5 percent below pre-COVID levels.

“Property pricing has regained much of the ground lost during the pandemic,” said Green Street Managing Director Peter Rothemund. “There’s still significant variation around that average, but low interest rates, a rebounding economy and plenty of capital looking for a home have increased the bid for all property types and make further price increases this year likely.” Green Street reported the best performing property type, industrial, is up 14 percent over the past year in its index while prices of lodging and retail properties are down 10 percent or more.