Scotsman Guide / September 18th, 2015
Scotsman Guide reports: Pricing gains were up in almost all property types in July. According to Moody’s/RCA National Composite Commercial Property Price Index (CPPI), commercial property prices were up 0.7 percent for the month—nearly 30 percent more than their pre-crisis peak in the major markets and within 1 percent in smaller markets. Real Capital Analytics (RCA), a global commercial real estate data and analytics firm, shows the CBD office and apartment sectors having the most price growth over the three months through July, rising 6.6 and 3 percent.
Annual gains in prices could slow down in some markets if cap rates stabilize or start increasing, says Jim Costello, Senior Vice President at Real Capital Analytics, noting that low cap rates are a major factor in the price growth in the office, industrial, and apartment sectors. In most markets cap rates have dropped to their lowest levels, thus in order to perpetuate price growth there would need to be an increase in income or a decline in cap rates–the latter being unlikely.
Costello said the rising property values will make it relatively easy to refinance 65 percent of the 2006-2007 pre-crisis CMBS loans. About 5 percent of those 2006-2007 CMBS loans are underwater and 30 percent are borderline cases where property values have not grown enough to know if they will be to refinance. These borderline properties are mainly in the suburban office and retail markets where there is less investor demand and slower price growth.
View the full article on Scotsman Guide: CRE Prices Continue to Rise in July