U.S CRE prices post largest annual gain since beginning of pandemic

U.S CRE prices post largest annual gain since beginning of pandemic

U.S commercial real estate (CRE) prices rose by 5.7% year-over-year in November due to the continued strong industrial and apartment price growth, posted its largest annual gain since the beginning of the pandemic, according to the latest Real Capital Analytics RCA CPPI (Commercial Property Price Indices) report.

Retail and office prices posted year-over-year declines, but not enough to bring down the all-types index, says RCA.

Apartment prices rose 0.8% from October and posted a 7.6% increase from last year. Annual returns for the sector have hovered in the mid-7% range over the last few months, and the deceleration that occurred beginning in March seems to have leveled off.

Industrial prices nearly broke back into a double-digit year-over-year growth range, up 9.5%. Although deal volume has fallen in the logistics sector this year, there is still an appetite for these properties, and that demand has driven price growth in the sector.

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The retail index fell 0.7% from October and has consistently been the worst performing asset class during the Covid era. Distressed retail assets represent nearly two-fifths of all outstanding distress and one-quarter of potential distress. Pricing for these properties reflects that distress load, as the retail index dropped 6.7% YOY in November.

Price declines in the office sector shrank in November, falling only 0.2% YOY. The office index gained 0.4% over the last month, which compares favorably to the 0.4% drop seen as recently as June.

In the Non-Major Metros, prices climbed 5.8% YOY in November, posting annual growth nearly double that of the 6 Major Metros at 3.1%.

The 6 Major Metros (6MM) are Boston, Chicago, Los Angeles, New York, San Francisco and Washington DC. Non-Major Metros (NMM) refers to all secondary and tertiary markets.