Commercial Property Prices Rise for Third Straight Month: Moody’s

Word on the street is that recovery is taking hold in the commercial real estate sector. Vacancy rates are starting to decline; delinquencies, although still elevated, are beginning to moderate; and property values are steadily increasing.
[IMAGE] Data released Monday by ""Moody's Investors Service"":http://www.moodys.com validates this last point. The ratings agency reports that U.S. commercial real estate prices as measured by the Moody's/REAL Commercial Property Price Index (CPPI) increased 0.6 percent in November.

It marks the third consecutive month of national price gains, following three prior months of decreasing prices.

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Moody's says commercial real estate prices have now moved up 6.4 percent since August 2010.

Prices at the end of November were up 2.8 percent over the prior year, but down 31.6 percent from November 2008 and 41.6 percent below the October 2007 peak.

""We expect the choppiness of the CPPI to continue in the months ahead,"" said Nick Levidy, Moody's managing director. ""A clear positive trend is unlikely to develop until markets become convinced that the recovery of the broader global economy has real staying power.""

The Moody's/REAL Commercial Property Price Indices are based on repeat sales of the same U.S. properties at different points in time. There were 121 repeat-sales transactions worth $1.7 billion in November, up from 110 sales totaling $1.4 billion in the prior month's CPPI.

In November, approximately 24 percent of the total repeat-sales transactions used to calculate the indices were considered distressed, down from the prior month and slightly below the yearly average of 26 percent.

""Due to the small number of overall repeat-sales transactions, only a few distressed sales can swing the total percentage of distressed sales above or below the annual average,"" Levidy explained.