Moody’s Investors Service real price Commercial Property Price Indices (CPPI) showed that U.S .commercial real estate prices fell by 0.6% in April.
The index is a periodic same-property round-trip investment price change index of the U.S. commercial investment property market based on data from Real Capital Analytics(RCA).
This past April, apartment prices were down 1.2% in April after there was a 37.4% increase from their January 2010 trough. The CPPI states that apartments in major markets began recovering 28 months ago and have retraced 82.0% of their peak to trough decline, which marks the strongest performance among the 20 sub-sectors of the CPPI.
Additionally, even though the central business district office sector in non-major markets was the first to reach its post-crisis pricing bottom 31 months ago, it still has yet to recover much pricing traction. Moody’s analysts mention that it retraced only 7.5% of its peak to trough decline.
The suburban office sector has encountered a major obstacle in its emerging recovery, as it has dropped by 14.4% over the last five months.
The industrial sector is the only commercial real estate sector that did not have flat-to-down prices in April, as its prices gained 1.1% that month. In fact, the industrial sector has recorded the greatest gain over the last quarter at 3.9%, although it still marginally lags the recovery in the core commercial sectors as a whole.
According to the CPPI report, prices across sectors for non-distressed properties in the major markets have recovered to 90.9% of peak levels. While, distressed transactions demonstrate price recovery in major markets, up 27.8% from the trough of 19 months ago. Distressed transaction prices in major markets, on the other hand, have remained basically flat since the fourth quarter of 2009.
“In general, we expect prices to stay flat in the near term of the next two to three months,” Moody’s director of CRE research, Tad Philipp explained to ASR when discussing future activity. “Fundamentals are still recovering and there is still a lot of turmoil in the capital market. However, as for longer-term, we predict that there will be an upward trajectory in the next two to three years. For retail and office sectors in particular, there still might be a year or two out for this recovery to occur. For apartment and hotel sectors that have been beginning to recover already, we expect them to continue to grow. As our report shows, it is different for each sector.”