Moody’s: Commercial Property Prices Increase 0.9%

In the month of June, U.S. commercial real estate prices rose 0.9 percent, according to the latest Moody's/REAL Commercial Property Price Indices released Monday. June is the second consecutive month prices rose.
[IMAGE] ""The June increase represents a firming up of the market bottom, but turmoil in the capital markets and a drop-off in CMBS lending may delay realization of significant near-term pricing gains,"" says Tad Philipp, ""Moody's"":http://www.moodys.com/ director of commercial real estate research.

According to the New York-based ratings agency, ""It is the broad middle portion of the market that continues to rise.""

The major asset/major market index - which accounts for properties sales at more than $10 million - declined for the second consecutive month after a year of increasing prices.

At 29 percent, sales of distressed properties remained uncharacteristically high.

While Moody's reported the total repeat-sales transaction to be 254 - the highest non-year-end rate since 2007 - transaction dollars increased by 3.2 percent, indicating that the high volume of trades consisted of many lower-priced properties.

On a quarterly basis, three of the four property types covered in the report experienced price increases - office, industrial, and apartment.

Retail was the only commercial property type to decrease in price with a 0.3 percent decline. Retail prices did post a year-over-year increase of 9.1 percent.

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Retail properties are currently 33.7 percent below their peak in the third quarter of 2007.

Office properties showed the greatest increase in prices for the quarter - 8.9 percent - its largest quarterly increase since Moody's began releasing its index in 2001. Office properties rose 2.3 percent since the second quarter of 2010.

Office properties registered 29.2 percent below their peak in the second quarter of 2007.

Industrial properties - which last quarter were at their lowest point since their 2007 peak - increased 2.5 percent.

Industrial properties are 5.1 percent below their second quarter 2010 values and 38.6 percent below their peak in the fourth quarter of 2007.

Apartment property prices rose slightly for the quarter - 0.6 percent.

Apartment prices are 30.6 percent below their peak in the first quarter of 2007.

However, apartment prices have risen 14.8 percent from their low point in 2009. Moody's reports this is the greatest post-peak increase among national property types.

Moody's also measures commercial property prices among the top 10 metropolitan statistical areas (MSA)-those with the most transactions measured in dollar volume.

In the top 10 MSAs, retail property prices rose 5.8 percent for the quarter, contrasting the slight decline nationally.

Industrial prices rose 2.2 percent in the top 10 MSAs, a slightly smaller increase than the 2.5 percent national increase.

Office prices rose 0.2 percent in the top 10 MSAs, contrasting the 8.9 percent national increase.

Apartments were the only commercial property type to show a decrease among the top 10 MSAs - decline 2.2 percent for the quarter.