Commercial Real Estate Delivers First Positive Return in 18 Months: IPD

Commercial real estate in the United States has recorded its first positive quarterly return in 18 months, according to the global research firm ""IPD"":http://www.ipd.com.

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The company's latest commercial property index shows a total return of 1.2 percent during the first three months of this year, made up of -0.5 percent capital growth and 1.7 percent income yield.

IPD says the performance of the commercial real estate (CRE) market has shown a steady quarterly improvement since bottoming out in Q1 2009.

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Cap rates are still above the long-term average across the sectors, but improved sentiment has boosted capital coming back into the market, the research firm says, with returning investors starting to compete on pricing more aggressively due to a limited supply of prime stock.

Beneath the headline total return figures sit slowing market value depreciation and resilient income returns for nearly every property type.

The biggest improvement in capital value growth was in the office sector, which delivered -0.7 percent compared to -3.7 percent the previous quarter. Multifamily followed closely with capital growth of 0.4 percent compared to -2.4 percent in Q4 2009.

Simon Fairchild, managing director of IPD North America, said, “While most indications are that the worst of the write-downs are behind investors, uncertainties persist on the medium term health of the broader economy.”

Fairchild noted that preliminary data from the Bureau of Economic Analysis indicated that Q1 GDP increased at an annual rate of 3.2 percent, but he says if economists’ predictions of a sluggish recovery are accurate then so too will be the pace of capital appreciation.