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Commercial asset prices continue upward march

Fewer commercial properties have changed hands in deals this year, but sales prices continued to move up through the fall, according to leading indices.

In October, the aggregate sales price of significant U.S. commercial and multifamily assets rose by 1.2 percent over the September level, and was up 8.4 percent year over year, according to Real Capital Analytics’ all-property index.

apartmentThe gain came despite a 23 percent year-over-year drop in deal volume in October, the sharpest decline in sales-transaction volume since January, RCA reported. RCA tracks sales of properties valued at $2.5 million or more.

RCA analysts say, on balance, asset owners are opting to hold their assets rather than lowering their prices to complete a deal. Financing has been readily available to borrowers with maturing loans.

“There are winners and losers in the market today, and sellers are not under pressure to sell — especially if their asset may fetch a lower price than they expect,”  said Elizabeth Szep, an RCA Analytics manager.

The growth in prices varies significantly by sector and market. Industrial led the way with a 9.9 percent year-over-year increase. Retail asset prices gained just 2.2 percent in the year. Office assets were up 5.4 percent year over year.

“Industrial assets are doing very well in the market among commercial properties, and apartment prices are still rising,” Szep told Scotsman Guide News. Apartment assets rose 9.8 percent year over year.

“The apartment growth is more driven by price gains in the non-major metros, as investors move outward to secondary markets for return,” Szep said. “[You] see this in apartment volumes as well, where transaction volume is still high in secondary and tertiary markets but has dropped off in the six major metros.”

Another leading index tells the same story of rising prices, particularly among lower-priced assets outside the major cities, in the face of falling asset sales. 

CoStar’s equal-weighted index which reflects more numerous but lower-priced asset sales — rose 14.7 percent for the 12-month period ending in September. 

CoStar’s value-weighed index, reflecting higher-value assets in major metros, rose just 4.1 percent through the same period. CoStar reported deal volume of $128.7 billion in the 12-month period ended in September 2017. That was down 4.3 percent from the 12-month period ended in September 2016.


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