Experts Debate the Future of Pricing for Commercial Real Estate
National Real Estate Investor reports: While there is no debate that pricing for commercial real estate has fallen dramatically from its peak in 2007, National Real Estate Investor contributing writer Matt Hudgins remarked that experts are still trying to figure out the future of property values in the current uncertain environment. He article followed the Moody’s/REAL Commercial Property Price Index (CPPI), which indicated that, after several months of decline, September’s index jumped 4.3%. That was the largest one-month increase in the nine-year history of the CPPI Index, but “experts debate whether the gains will last, or will instead prove to be one in a series of severe fluctuation.”
Mr Hudgins went on to quote Dan Fasulo, managing director of Real Capital Analytics, which provides the CPPI’s underlying data, as stating that “There are lower-quality assets now in the data set and it is causing these pretty violent changes month to month.” As more distressed assets, which typically have lower prices than their non-distressed counterparts, come to market they will tend to act as a drag on the overall pricing index. Buyers are also opting to purchase some lower-quality assets in secondary markets at this point in the cycle, stated Mr Fasulo, so the share those properties take in any particular month may have some influence on the index as well.
Mr Fasulo is one of the less optimistic opinions on the subject, as he stated that, “Until underlying fundamentals recover in a really strong way, with rents and occupancy levels showing a clear upward trend nationwide, you’ll continue to see the index bounce along the bottom.” David Geltner, who led the team at MIT that created the CPPI, stated in his analysis accompanying the index’s release that, “This type of extreme volatility probably largely reflects what is actually going on in the U.S. 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.”
View the full article on National Real Estate Investor: Experts Debate the Future of Pricing for Commercial Real Estate
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Posted by: Nina Turner