Commercial Property Pricing Slides in February, Nears Cycle's Relative-Low
New York Times reports: “Prices for both home and commercial real estate are falling again,” proclaimed a recent New York Times article on the subject of pricing in both sectors. Specifically, the article relied on the Moody’s/REAL Commercial Property Price index (CPPI), which is generated using repeat sales of commercial properties logged by Real Capital Analytics, to discuss the latest drop in pricing. And in fact, the CPPI has fallen by 4.9% over the 12 months, with only slight gains measured early last fall. The index now sits just 0.8% above its August 2010 low.
The Times rightly points out that the headline index results do mask important underlying trends. One of the largest drivers of the fall in the pricing metric for commercial properties was the share of sales associated with distressed assets, which are often sold for much less relative to their previous transaction amounts. Moody’s Director of Commercial Real Estate Research remarked of February’s high percentage of transactions involving distressed assets, “Only when the share of distressed sales meaningfully drops off will we be able to enter the recovery phase.” The CPPI breaks down the national trends on a regional and property type basis.
Parallel to the trend of distressed sales weighing on commercial pricing, the sales of trophy and top-tier assets have buoyed the index over the past few months as investors clamor for the best of the best. Competition in that segment has pushed up pricing on those high-quality properties to boom-era levels or higher.
View the full article on New York Times: Commercial Property Pricing Slides in February, Nears Cycle's Relative-Low
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Posted by: Nina Turner