CRE Price Growth Slows to Eight-Year Low

Michael Tucker mtucker@mba.org

March 07, 2019


Growth in U.S. commercial property prices slowed to the weakest annual pace in eight years in January, reported Real Capital Analytics, New York.

RCA's National All-Property index rose just 0.3 percent in January. But the index is up 5.8 percent from a year ago.

Willem Vlaming, Senior Analyst with RCA, said apartment sector price growth remains the strongest at an 8.8 percent annual pace of increase. "However, the sector does not escape the waning trend and this was the lowest increase since 2013," he said, noting apartment price growth hovered around 12 percent for most of first-half 2018.

"The one property type that kept the damage limited in terms of single property sales was the industrial sector," Vlaming said. That sector had the strongest monthly price growth of all property types at 0.6 percent, he said.

Central business district offices and retail properties showed "moderate" annual price growth in January, RCA reported.

Focusing on unleveraged commercial properties owned by real estate investment trusts, Green Street Advisors, Newport Beach, Calif., reported no price change in January. Green Street's index increased by less than 1 percent over the past six months and a modest 2 percent over the past year.

"Property appreciation has, for the most part, come to a halt over the past few months," Green Street Advisors Managing Director Peter Rothemund said.

CoStar, Washington, D.C., said CRE transaction volume saw a seasonal slowdown in January, but was up from one year ago. "Composite pair volume in January 2019 was lower than the pace set in the previous several months, reflecting a seasonal pattern that has been observed in prior years whereby investors take a breather following the rush to close deals before prior year-end," the research firm's monthly pricing report said.

Other liquidity measures held steady, CoStar said. For-sale properties' average time on market remained unchanged at 205 days, down significantly from the 218-day average in January 2018. The sale-price-to-asking-price ratio--a reflection of the difference between buyer's expectations and seller's expectations, has remained essentially flat over the last year while the share of properties withdrawn from the market by discouraged sellers slipped 20 basis points to 26.8 percent in the 12 months ending in January.

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