U.S. Commercial Real Estate Post 1% Increase in November, Moody’s

U.S. commercial real estate prices increased by 1% in November, after 13 consecutive months of declines, according to Moody’s (MCO) latest Moody’s/REAL Commercial Property Price Index, released Wednesday morning.

A word of caution for the CRE optimists here who may think the worst is over. The rating agency says that while the increase is a small but bright spot for the sector, it expects further declines in the space, with the possible exception of apartment buildings.

Here are some excerpts from the Moody’s  report:

  • WSJ: After 13 consecutive months of declining property values, the Moody’s/REAL Commercial Property Price Index (CPPI) measured a 1.0% increase in prices in November. Prices began falling over two years ago and significant declines were seen throughout 2009, with several months experiencing 5%+ value drops. The 1.0% growth in prices seen in November is a small bright spot for the commercial real estate sector, which has seen values fall over 43% from the peak.
  • Transaction volume fell in November.  Overall, 362 total sales were recorded, with an aggregate value of $4.1 billion.
  • We expect commercial real estate prices to decline further in the months ahead. Prices for properties with short term lease structures, such as multifamily, could show signs of a sustainable recovery later this year, while other property types will likely need longer to turn the corner.
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