Apartment Property Price Growth Overtakes Industrial
Apartment property prices grew faster than industrial asset prices in June, reversing a trend seen through most of 2021, reported Real Capital Analytics, New York.
RCA Analyst Shane Omundsen said apartment sector prices increased at a 10.1 percent annual pace in May, overtaking industrial at 9.5 percent. Office prices grew at a 2.9 percent pace, while the retail sector turned in a 2.3 percent annual gain.
“The headline rate of U.S. property price growth quickened in May, powered by accelerating increases in apartment prices and gains across all major property types,” Omundsen said. He noted RCA’s National All-Property Index grew 0.8 percent from April and 8.9 percent from a year ago.
Suburban office properties drove price growth in the office market with a 4.5 percent year-over-year increase while central business district office prices declined 5.5 percent. “The CBD office index has not registered a positive annual return since August,” Omundsen said.
The apartment sector has also recorded the most deal activity so far in 2021, Omundsen said. RCA reported apartment sector activity more than doubled same-period 2020 figures and deal volume surpassed that of the office and industrial sectors combined.
Green Street, Newport Beach, Calif., said its index of commercial properties owned by real estate investment trusts increased 4.4 percent in May as prices for every property type increased. The Green Street all-property index now falls only 1 percentage point below pre-COVID levels.
“Top lines are improving, cap rates are declining and property prices are quickly recovering lost ground,” said Peter Rothemund, Managing Director at Green Street. He said prices are hitting new highs in some sectors such as self-storage and industrial, which are now 15-25 percent higher than before the pandemic.
Rothemund said the Green Street index held steady in June, but the realization that property fundamentals are a lot healthier than expected combined with low borrowing costs and discount rates is leading investors to pay higher and higher prices. “With the economy on stable ground and many property investors paying interest at 2 percent per year or less, further price gains are almost a certainty,” he said.