Moody’s: Commercial real estate prices rise
Commercial real estate prices increased in September, according to Moody’s/REAL Commercial Property Price Indices, Moody’s Investors Service said Wednesday.
The index rose 2.5 percent from August, but was down 7.9 percent from the year-ago level.
The CPPI now stands 9.4 percent below its peak in October 2007.
The index is based on repeat sales of the same properties across the U.S. at different points in time.
A price increase in September may seem “counterintuitive” because of a lack of liquidity and general turmoil in the financial markets and the general economy, Moody’s said in its report.
“However, we believe this result can be explained by continued loss avoidance on the part of sellers and by the fact that many September closings occurred pursuant to contracts entered into in the summer, before the market turmoil of September and October,” said Nick Levidy, Moody’s managing director, in a news release.
Moody’s also said part of the price increase also may be attributed to “some relative strength in the apartment sector,” but the increase may not last.
“We believe that commercial property prices will soon start to decline again. As pressure continues to build in the sector, owners will begin selling into a deteriorating market at lower prices,” Levidy said.
The top 10 markets showed modest gains in all property sectors in the third quarter, Moody’s said. Office prices in the top 10 cities saw a 2.2 percent increase from the previous quarter.
Nationally, office prices were down 1 percent in the third quarter; industrial and retail prices were nearly flat; and apartment prices were up 2.3 percent.
Still, prices for the four property types are down significantly year over year, Moody’s said. Compared with September 2007, apartments fell 7.2 percent, industrial dropped 10.1 percent, office was down 8.3 percent, and retail fell 9.9 percent.
