Commercial Property Prices Post 1.7% Gain in April: Moody’s

Commercial real estate prices (CRE) in the United States rose 1.7 percent in April, according to data released Monday by ""Moody's Investors Service"":http://www.moodys.com. It's the first monthly increase recorded by the Wall Street ratings agency since January.
[IMAGE] As measured by Moody's/REAL Commercial Property Price Indices (CPPI), prices nationwide are currently 41.1 percent below their peak in October 2007, and have come back just 4.7 percent from their October 2009 low.

""Prices have remained choppy since October,"" said Nick Levidy, managing director at Moody's. ""While prices have moved as one would expect at a market bottom, transaction volume has been extremely low, making it difficult to conclude prices have stabilized.""

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Recent ""commentary from Pacific Investment Management Co."":http://www.pimco.com/LeftNav/PIMCO+Spotlight/2010/U.S.+Commercial+Real+Estate+Project+June+2010.htm (Pimco) further illustrates that point.

""We caution against the presumption [that an] _implied_ improvement in CRE asset values portends a rapid recovery in actual CRE asset prices,"" the investment firm said. ""Instead, as over $500 billion of over-leveraged CRE properties slowly reach the market through lender dispositions or restructurings, we expect general CRE asset prices to remain 30 percent to 40 percent below 2007 peak pricing levels for three to five years.""

Pimco argues rather pointedly in its report that national price indices such as Moody's CPPI can provide ""misleading indications of a recovery"" in CRE asset price levels.

""While it is natural to draw comparisons between the CPPI and the S&P/Case-Shiller index used to gauge residential home prices, we caution that indexes such as the CPPI are relatively meaningless in today's limited transaction environment â€" commercial real estate transaction volume fell nearly 90 percent from 2007 to 2009,"" Pimco said.

And according to Moody's the number and volume of transactions is continuing to fall. The ratings agency tracked 114 repeat sales in April and a total balance of just under $800 million. That compares to 127 repeat sales in March.