NEWPORT BEACH, CA—Commercial property prices remain strong as interest rates remain low, according to Green Street Advisors Inc. The independent research, trading and consulting firm reports that its commercial property price index was unchanged in July, staying on the same robust track it has been on for several months.
Values are now at or above 2007 highs in nearly every major property sector, the firm found, having a compression effect on cap rates. “Property pricing continues to be strong, as buyers continue to push cap rates lower,” says Peter Rothemund, an analyst at Green Street. “And who can blame them? Low interest rates across the capital markets make real estate returns look rather compelling to today’s property investor.”
Strong pricing can now be seen in many sectors of the market, including the office sector, which had been lagging behind the others and has been one of the slowest to emerge from the recession. As GlobeSt.com reported earlier this week, Auction.com racked up an impressive $121 million in online real estate auction sales during the month of June, and most of the sales came from office properties.
Data from the Metro Economy and Property Ratings for Summer 2014 from Auction.com Research points to recovery within the sector, which faced a steep decline during the recession. Total office employment is up 2.4% over the past year, a contributing factor to the office-property vacancy and rent improvements seen in past quarters and a likely cause of the heightened office-property transactions noted in this month’s report.
In addition to the commercial sector, pricing in the housing sector has also rebounded. In fact, as GlobeSt.com also reported today, national housing prices have increased to the point where 34% of US county housing markets are now less affordable for buying than their long-term averages, according to a report from RealtyTrac. The firm found that as of the second quarter, one-third of the counties analyzed have surpassed their historical averages for income-to-price affordability percentages since 2000, making them less affordable now than they have been on average over the last 14 years.