Commercial real estate prices in the U.S. posted steady year-over-year gains in September, with nearly every major property type seeing increases except for multifamily, according to the latest data from MSCI. The RCA CPPI US national indexes showed that overall CRE property prices rose 2.6% compared to the same month last year, and gained 2.2% from the second quarter, suggesting an annualized growth rate of 9%, MSCI noted.
The office sector led the way among property types, with prices rising 7.1% over the past year. Notably, the central business district (CBD) segment of the office market saw a 5.1% increase, while suburban office prices rose 4.5%. For the first time since early 2022, CBD office price growth outpaced the suburbs. MSCI observed that both segments outperformed their annual growth rates but offered no explanation for why the aggregate office price increase outstripped the gains in either the CBD or suburban subcategories, except to suggest that some office properties may not fall strictly into either group.
Retail properties also performed well, with prices increasing 5.5% year-over-year, marking the 17th consecutive month of gains, though the category remains 1% below its March 2022 level. Industrial property prices climbed 4% in the same period. While industrial pricing was the fastest-growing segment at the start of the year, the segment is now 14% above its March 2022 level.
Excluding multifamily, overall commercial property prices rose 4.5% year-over-year. Multifamily was the sole sector to post a decline, slipping 0.8% over the past year. The multifamily index also dropped at an annualized rate of 3.3% from the previous quarter. The last period of growth for multifamily prices was at the end of 2022, and the index now stands 20% below its July 2022 peak.
Among markets, Raleigh/Durham, Sacramento and Miami/South Florida experienced the biggest annual price increases across property types, followed by strong gains in Manhattan, Phoenix, Houston, the Inland Empire, NYC suburbs, the DC Metro Central region, and Chicago. Conversely, the sharpest one-year declines occurred in Tampa, the DC Metro, San Diego, Denver, Orange County, several Bay Area and Los Angeles submarkets, Boston Metro Central, and San Francisco.
Looking at five-year trends, Miami/South Florida and the Inland Empire topped U.S. markets with price growth of 45% to 27%, with other Sun Belt locations and NYC suburbs making the top 10. On the flip side, places like Denver, central Chicago, multiple Bay Area submarkets, Manhattan, downtown Los Angeles, the DC region, Boston and San Francisco all ranked at the bottom, with declines ranging from about 5% to nearly 40% over the period, according to MSCI’s report.
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