Commercial Property Prices Dip

(Illustration courtesy of Real Capital Analytics)

The pace of decline in U.S. commercial real estate prices decelerated in March, led by improvements in the industrial sector, Real Capital Analytics reported.

But the RCA CPPI National All-Property Index dipped 0.2% in March and is down 3.0% compared to a year ago, RCA reported.

“Amid the current high interest rate environment, certain property sectors with stronger fundamentals have outperformed others,” RCA said. “Prices in the industrial sector have rebounded in recent months, while higher borrowing costs coupled with the uncertainty around the future for space have continued to drag down office prices.”

Retail was the only sector other than industrial to post month-over-month growth, albeit just a 0.1% uptick, RCA said.

The pace of decline for apartment prices has decelerated for seven months, but the index remains 8.4% lower than a year earlier. “Despite the continued fall in the index, apartment prices are still 11% above the level in April 2020 at the start of the pandemic,” RCA said.

In a separate report, Green Street, Newport Beach, Calif., called commercial property “fairly valued.” The data firm’s Commercial Property Price Index was unchanged in March. (Green Street’s price index is appraisal-based, so it sometimes varies from other indexes that track property prices based on transactions.)

“After back-to-back years of significant declines, property prices have regained their footing,” Green Street Co-Head of Strategic Research Peter Rothemund said. “With commercial real estate priced fairly vs. corporate bonds, the trend of little-to-no change in pricing is likely to continue.”

The Green Street all-property index–a measure of pricing for institutional-quality commercial real estate–is down 7% over the past year and 21% since its March ’22 peak.