NEWPORT BEACH, CA-Green Street Advisors Inc. reports that commercial property values have fully recovered the ground that was lost during the last downturn since values are now, on average, back to their ’07 highs. The firm’s commercial property price index shows values increased by 2% in March.
“We’ve had modest economic growth, very low interest rates and minimal new building,” said Peter Rothemund, an analyst at Green Street, in a prepared statement. “And it looks like the upward momentum in values will continue. Real estate looks quite attractive relative to the yields that are available in the fixed-income market.”
The firm’s property price index is a time series of unleveraged US commercial property values that captures the prices at which commercial real estate transactions are currently being negotiated and contracted. Features that differentiate this index are its timeliness, its emphasis on high-quality properties and its ability to capture changes in the aggregate value of the commercial property sector.
Commercial real estate values continue to benefit from a backdrop of low interest rates coupled with modest economic growth, and it’s likely the upward momentum in values witnessed so far will be sustained, according to the report.
“Strengthening real estate fundamentals have played a role, but the recovery has really been driven by low interest rates,” Rothemund tells GlobeSt.com. “You can buy bonds and get something like 4% or you can buy real estate and get 7. Real estate wins and will continue to as long as interest rates stay this low.”
As GlobeSt.com previously reported, encouraged by low interest rates and pent-up demand, the West continued its slow journey toward recovery in 2012. The Golden State is still attractive to residents and businesses, even though the combination of Proposition 30 and higher federal taxes makes some ask, “Should I stay or should I go?”