RCA in the commercial property press:

Volatility Undermines Commercial Property Market Recovery

Globe St reports: Before market observers get too wrapped up in the rapid return of commercial real estate sales, it should be recognized that the recent recovery over the past two quarters is qualified and fairly volatile for the time being. Paul Bubny, writing for Globe St, cited the recent Moody’s/REAL Commercial Property Price Indices (CPPI) as evidence of this volatility. The CPPI “increased 4.3% in September, the largest gain in the history of the CPPI. However, the previous month’s report, which said that commercial property prices slipped to their lowest level in 10 months, underscores the market’s continuing volatility.”

The article quotes the commentary that typically accompanies the monthly CPPI’s release by David Geltner, who headed the indices' develop in 2006: “This type of extreme volatility probably largely reflects what is actually going on in the US commercial property market, as asset markets typically display greater volatility during periods of fundamental uncertainty, rapid economic and institutional or political change, and transition in the markets.” The vacillation between rapid gains in pricing, such as September’s historically large rise, and even greater drops over time. Because the number of repeat transactions is so low, pricing and activity can be easily distorted by outlying deals such as October’s sale of the Extended Stay hotel portfolio.

While Mr Bubny offers no opinion on when the current volatility in the market may subside, it is implied that outside forces need to settle and more sales activity in general will precede such a period of normality.

Articles related to this topic:

 Slow Economic Growth and Volatility – The New Normal?
 Second Monthly Rise in Commercial Property Pricing Index (CPPI)
 Once Bitten: Investors Tepidly Shopping in Secondary Property Markets

Posted by: Nina Turner

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