Monday, February 22, 2010

CRE Price Slide Slowing?


U.S. commercial real-estate prices rose again in December, signaling a possible end to big price declines, Moody's Investors Service said.

The Moody's/Real Commercial Property Price Indices rose 4.1% for the month, the second monthly increase in a row and the biggest month-to-month increase in the nine year history of the indexes. The market has shown some signs of life recently, with the first increase in over a year seen in November.

"Although we are unable to conclude that the bottom to the commercial real estate market is here, we do believe that the period of large price declines is over," said Moody's managing director Nick Levidy on Monday.

Overall, 716 transactions totalling $9 billion were recorded in December.

Still, prices were down 29% from a year earlier and 40% from two years earlier as of Dec. 31. They are 41% below their peaks.

Quarterly national property type indexes show three of the four major property types recording price gains in the fourth quarter, with only retail posting a slight decline of 1.5%. Offices had the largest gain, at 7.9%, while apartments improved 7% during the quarter and industrial increased 5.6%. For the year, however, the four property types had declines of 19% to 23%.

In the top 10 metropolitan areas, which account for 50% to 80% of the transactions in the national property type indexes, apartment prices fell 2.1% in the fourth quarter and industrial prices were down 2.8%. Retail posted a 3.1% increase, while offices rebounded with a big 27% increase after declines of 20% in the third quarter and 10% in the second quarter.

Regionally, the West fared better than the national price index in all of 2009 in three of the four property types, with offices the exception. Western office prices fell 26% in 2009, versus a national decline of 20%. In the fourth quarter, western office values dropped 5.7%.