US commercial prices fall 3.3% to eight year low, figures show

 
It means that nationwide, commercial real estate prices remain about 45% below their peak values in October 2007. That puts them at about where they were in 2002, the firm said.
 
The value of the repeat sales rose to $1.85 billion, up from $1.35 billion in July. But the number of transactions remains significantly below what it was during the peak, the report also shows.
 
Price trends across the commercial real estate sector have been mixed, with properties in major US markets appreciating, smaller properties remaining flat and distressed assets seeing prices drop sharply, said Nick Levidy, Moody’s managing director.
 
‘The commercial real estate market in the US has become trifurcated with prices rising for performing trophy assets located in major markets, falling sharply for distressed assets, and remaining essentially flat for smaller healthy properties,’ he explained.
 
‘Prior to 2009 there were only a few distressed sales and performing properties drove the CPPI. During the downturn, however, the number of distressed properties has increased, causing an increased weighting of the CPPI towards troubled properties that have had large negative rates of return,’ Levidy added.
 
Moody’s tracks prices in office, retail, apartment and industrial segments, measuring them based on the repeat sales of the same properties across the US at different points in time.
 
Moody’s commercial real estate prices are now 19% lower than the consumer price index but analysts expect the index to ‘revert to a long term trend line close to that of the CPI’.
 
According to Neal Elkin, president of Real Estate Analytics, there is a small pool of stable large assets in primary markets that are in demand but outside those primary assets, there’s a pretty dramatic price movement down.
 
Prices for the best buildings in New York, Washington, San Francisco, Boston, Los Angeles and Chicago, the markets favoured by institutional investors, are up 23% through August from its 2009 low, according to David Geltner, director of research at the MIT Center for Real Estate in Cambridge, Massachusetts.
 
In the top three markets of New York, San Francisco and Washington, so-called trophy prices have gained 37% from last year’s bottom, according to Geltner.