Trepp has a new CRE property price analysis for the last quarter of 2024. The Federal Reserve’s interest rate cuts last fall have helped ease financial constraints. However, “persistent structural challenges led to uneven price recoveries across property sectors” and uncertainty about the future continues to spook investors.
First, some words on the measurement tools: The analysis used the Trepp Property Price Index (TPPI), which tracks price movements using repeat sales of properties and traces changes in movements. In Q4 2024, 8,467 sales pairs were added.
There are two indexes. The EW index prices across property types and price tiers to provide a balanced representation of market trends without allowing any segment to take command and bias the entire results. The VW index emphasizes large dollar transactions to show trends by tracking the flow and concentration of capital.
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According to Trepp, the composite indexes show signs of a potential recovery. In the fourth quarter of 2024, the EW index rose 0.76% from the previous three months — but the -0.20% level sine 2022 has offered not much positives. The VW index increased 1.24% quarter-over-quarter but is still down by 10.74% from 2022 highs.
The two indexes differ in long-term trends but have been moving in tandem over the last few quarters, which Trepp says indicates “a consistent pattern across the market and price points.” The most recent data suggests that the 100 basis points in total interest rate cuts the Fed undertook in the fall of 2024 “are beginning to support a recovery in CRE prices.”
Trepp says, as others have, that it takes time for the results of rate cuts to permeate the market and make clear the impact they might be having. The changes in rates have to travel through shifts as lenders adjust risk management profiles and rebalance portfolios.
For multifamily, the EW and VW indices showed respective quarter-over-quarter price gains of 0.95% and 1.76%, suggesting a trend toward recovery across price categories. As average rents have been rising in many markets, there will likely be more relief. Freddie Mac projects 2.2% rent growth in 2025; last year it was 0.3% through the third quarter. Meanwhile, deliveries are slowing with fewer units expected in 2025, addressing supply.
Office is also showing some recovery signs, with the EW and VW indexes up 0.41% and 1.08% quarter-over-quarter respectively. Things are still “significantly depressed,” down 20.35% in the VW index compared to 2022, there are some developments that might help, like large corporations enforcing return-to-office. And large investors are returning. But it’s important to remember the bifurcation of the property type, with Class A and A+ doing well, while B and C bear the brunt of the pain.
Retail saw the EW index down 0.32% and the VW fall 3.29%. The sector depends on consumer behavior, with reduced foot traffic in stores and more use of e-commerce. And yet, in many analyses covered by GlobeSt.com, the asset class has managed reasonably well.
Industrial saw a 1.03% quarter-over-quarter increase in the EW index and a 2.43% year-over-year gain. The VW index was up 1.54% quarter-over-quarter and down 0.42% year-over-year. Data centers were a bright spot too, but there is the potential for oversupply.
Lodging “continues to struggle," as the EW index was down 1.42% quarter-over-quarter and 5.94% year-over-year. Business travel patterns are shifting, especially with the now-mature use of video calls, softening consumer confidence, and an oversupply of hotels taking a pricing toll.
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