U.S. Commercial Real Estate Falls Sharply in March

Commercial real estate prices as measured by Moody’s/REAL Commercial Property Price Indices [CPPI] decreased 2.3% in March, the largest one month decline since the inception of the index. The March decline leaves the Moody’s/REAL CPPI at a level 2.6% below its peak in October 2007.

The March decrease still makes for a year-over-year increase in prices through March of 0.9%. The two-year increase in prices is 10.5%.

Quarterly data on the index’s four property types show all products off their peak prices for 2007. Retail is off the most, down -5.7, while apartments are down -3.4%. Offices, down -2.0%, and industrial, down -2.3, show the least declines.

The West had the dubious distinction of being home to the worst performing asset in the report - offices in the region - where prices dropped by 5.1% from the previous quarter, much steeper than the decline in the national office sector (-1.2%) or in the Top Ten cities (-0.6%).

Moody’s notes that monthly transaction volume in March was down from the monthly average of last year. The decline was about one-third as measured by number, or about one-half as measured by dollar volume. Nonetheless, sales levels are still more than eleven times the level needed for the CPPI’s statistical accuracy.

In aggregate, the distribution of transactions over the last year has drifted towards lower priced assets. During March, 62.9% of all sales were for under $7.5 million, compared with under half a year ago.

Full details area available from Moody’s/REAL Commercial Property Price Indices.

Comments

[johnthebear:]

That is why I invested in SRS! Finally getting some profit!

2008 May 20 03:06 PM

[Sami:]

the index being down will not translate, necessarily, to profit in the SRS. If the market is heading up expect more losses in the SRS, which is down ytd 25%, or on any other reporting period 1, 3, 6, 12 months.

2008 May 20 03:51 PM

[johnthebear:]

Every where you look, the bulls and politicians look for the tiniest piece of news that might be "better than expectations", even when the market is shouting the "ship is sinking slower" to try make a positive case. IYR is taking a big hit today, and those that say real estate is the place to be because of a prior 4% dividend will be of little comfort when they find a 40% loss of capital.

It is amazing as well, that with the likely loss of $1 trillion dollars in the global financial system the bulls have not figured out yet that when a multiplier is applied, the loss in lending power by the banking system is of historic proportions. It will be hard for anyone to visualize and forecast the market over the next 5 years.

2008 May 20 09:46 PM

[G. L. Turner:]

The HIGH, SINFUL PRICE OF SPECULATIVE OIL - is just in the early stages of causing the economic demise of our way of life as we have know it...What george bush started withe Oil Mergers ni 2003/4 is now being carreid to new heights by the grred mongers at Goldman Sachs...

- Watch the vacancies in the commercial real estate space begin to increase rapidly over hte second half of this year...the ship is sinking- much fster than the lobby backed politicians and corporate financed news medias like CNBC want us to know - problem is - they know intuitively - but are all on the same "one last sucker" / BUSH REP. syndrome - hope they enjoy the ride down they have created.......
G

2008 May 20 11:28 PM

[Tom Lindmark:]

I've been of the opinion for some time that now is not the time to buy commercial real estate. It seems that the dearth of financing has got to have an effect on valuations particularly as refinancings start to roll around. Here's a link to some thoughts I laid out about a month ago-blog.metro-real-estate....

We have quite a bit of money that we're sitting on and news like this is sort of convincing me to keep sitting on it. Any comments from other readers would be appreciated. I need more input from people outside my geographic area. Thanks. I'll check back later.

2008 May 21 06:02 PM

[sickofthehype:]

While we freak out about our market, this is what others around the globe are doing concerning our commercial real estate

www.business24-7.ae/Ar...

2008 May 30 12:13 AM