Global commercial property prices increased by 6.2% year-on-year in the first quarter, adjusting down from the double-digit annual growth rates seen as recently as a year ago, according to the latest RCA CPPI Global Cities report.
The sharpest slowing in price growth was seen in the Asia Pacific region. The Asia Pacific Composite of the RCA CPPI slipped to a 6.2% YOY rate of growth, down from a 14.3% YOY pace at the start of 2018.
Hong Kong and Sydney led this retreat, each falling from high double-digit growth rates a year earlier. Seoul bucked this trend within the region with stronger growth in Q1’19 than a year prior.
The slowing in price growth across the European markets was not as pronounced as that in Asia Pacific, yet here too prices were growing at a healthier clip a year earlier. The European Composite of the RCA CPPI grew at a 5.6% YOY pace. Prices are still increasing across Europe, and, notably, London set a stronger pace of growth in Q1’19 than a year prior.
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North American markets decelerated less than other regions, in part because these markets had slower price growth back in early 2018. The North American Composite of the RCA CPPI grew at a 6.7% YOY pace in Q1’19, with San Francisco and Los Angeles leading the pack.
Commercial property price growth was still robust across several of the metro areas analyzed in the report, with three posting increases at or greater than 10% year-over-year in the first quarter. Two of the metro areas and two central markets posted price declines in Q1’19 compared with a year ago.
In Sydney, prices for the metro market were down 3.1% YOY in the first quarter. A year earlier, the market had posted a 26.1% YOY pace of growth. Likewise, in Boston, prices were down 2.1% YOY in Q1’19; back in 2017 prices had grown above a 20% YOY pace. While prices in the New York and London metros increased, prices in their central markets slipped.
” In these markets, prices are simply adjusting back from rapid growth and to a level needed for deals to close. While not falling at a uniform pace, transaction activity is lower than in the recent past. Buyers and sellers are further apart on price expectations than they had been just a couple of years earlier when interest rates were still falling worldwide. When owners elect to sell assets in these markets, some slight price adjustments are needed to achieve the liquidity they seek,” said in report.
In New York, prices were up 5.6% YOY for the metro area, but in the Manhattan market – the heart of the region – prices were down 2.4% YOY.
Tech-heavy San Francisco led the pack with prices up 14.1% YOY. Los Angeles is the other California market covered in this report and this market posted an 8.2% YOY pace of price growth. Were California a country by itself, the Golden State would have the strongest commercial property price growth globally.
Source: Real Capital Analytics
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