Commercial property prices showed annual growth in January of 0.3% after three consecutive monthly increases and was up 0.5% month-over-month to start the year, according to MCI’s RCA Commercial Property Price Index (CPPI) national all-property index. This trend suggests a faster annualized pace of growth of 6.5%, the company said.
The RCA CPPI is based on repeat-sales (RS) transactions that occurred at any time up through the month of the current report.
The commercial real estate sector faces a number of challenges that are driving uneven price paths, including inflation, rising borrowing costs and shifting market dynamics, MSCI said. Adding trade tension and economic uncertainty will likely cause this trend to persist.
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With a 5% year-over-year gain in January, the retail index outperformed all property types. The sector rose 1.5% month over month, which, when annualized, suggests an even larger increase of 18.9%, said MSCI.
The only other asset class aside from retail that posted annual growth in January was industrial, which rose 3.4% over the past year. That is its seventh consecutive month of annual growth, with prices unchanged month-over-month. Industrial had been the strongest performer and consistently outpaced other property types in price appreciation for years, until recently being outpaced by retail.
All other property type prices dropped on the index. Apartment prices were down 1.6% in January but up 0.7% for the month, which suggests an annualized rate growth of 8.1%. Central business district office prices continued to post the most severe declines, falling 10% for the year ending in January and 0.6% from the previous month. Meanwhile, suburban office prices fell 1.5% year-over-year but inched up 0.1% for the month.
Prices in the MSCi’s six major metros – Boston, Chicago, Los Angeles, New York, San Francisco and Washington D.C. – fell 4.1% year-over-year in January, while the non-major metros rose 0.8%. The non-major areas also eclipsed the major metros on a month-over-month basis, said MSCI.
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Kristen Smithberg
Kristen Smithberg is a Colorado-based freelance writer who covers commercial real estate, insurance, benefits and retirement topics for BenefitsPRO and other industry publications.
