Commercial real estate price growth in large markets is expected to flatten over the next year, but strong leasing demand and investor appetite in smaller markets should keep the sector on solid ground, according to the latest National Association of REALTORS ® (NAR) quarterly commercial real estate forecast.
Moody's Investors Service is reporting that U.S.
commercial real estate prices declined by 3.7 percent during the month of April, as distressed prices masked the price recovery seen in larger, higher - quality assets.
From those peaks, home prices have fallen by about 30 percent on average, with much larger declines in some areas,
while commercial real estate prices have fallen by about 40 percent on average.
Zell said in a panel discussion that he
expects commercial real estate prices to remain high, keeping the yield on properties low, because investors from Saudi Arabia, Hong Kong and other parts of the world favor the relatively safe and predictable returns U.S. properties offer.
Commercial real estate prices as measured by the Moody's / RCA Index are projected to rise by 7.6 percent per year, compared to a long - term average increase of 5.3 percent.
As for the question of
whether commercial real estate prices are going to drop as much as 20 % in value — a view held by Goldman Sachs — Coumarianos said that «everyone is scared about any kind of building,» adding that the supply situation is not as bad on the multifamily side as it is on the single - family side.
Regardless, there are many catalysts: a tight labor market, wage growth picking up, a stock market at or near record highs, housing values rising quickly,
high commercial real estate prices, low cap rates and narrow credit spreads.
Wage growth will be needed to entice workers to enter the construction field, and that will drive up construction costs and
affect commercial real estate pricing for both investors and occupiers.»
Source: «Moody's:
US Commercial Real Estate Prices Fall 3.7 Percent in April,» The Wall Street Journal, Melodie Warner (June 23, 2011) © Copyright 2011 Information Inc..
«The combination
of commercial real estate pricing and appreciation exceeding the previous market peak has left CCIMs and their clients with a big hurdle of taxation that significantly affects after - tax returns,» says Saunders, senior vice president at Asset Preservation, a subsidy of Stewart Information Service Corp. «Consequently, CCIMs have seen a surge in 1031 demand in markets where inventory is very limited.»
Outgoing Federal Reserve Chair Janet Yellen said U.S. stocks and
commercial real estate prices are elevated but stopped short of saying those markets are in a bubble.
Commercial real estate prices are now «quite high relative to rents,» Yellen said.
You can think of
some commercial real estate prices in certain markets.
Banks, by contrast, are pulling back as slowing global economic growth, uncertainty over interest - rates increases and pockets of overbuilding spark concern that
commercial real estate prices are due for a fall after almost doubling in six years.
This has had a profound economic impact and carries with it implications for property market fundamentals and
commercial real estate pricing.
I would say that in real estate, while values are high, we are seeing some tightening of lending standards and less debt growth associated with that rise in
commercial real estate prices.
Commercial real estate prices are forecasted to rise by 10 percent in 2015 and then slow to a 6 percent increase in 2016 and to 4.5 percent in 2017 — below the long - term average growth rate.
Loss Aversion and Anchoring in
Commercial Real Estate Pricing: Empirical Evidence and Price Index Implications
Commercial real estate prices are projected to decelerate as well, with increases slowing to 5.0 percent in 2016, 4.0 percent in 2017 and 2.5 percent in 2018, all below the long - term average growth rate of 5.7 percent.
Commercial real estate prices are projected to rise by 10.0 percent in 2015 and to slow to a 6.0 % percent increase in 2016.
«Since then, however, the signals have become notably more bearish, and there is now a good chance that
commercial real estate prices will be lower within the next 12 months,» McCulloch added.
And during that time, residential and
commercial real estate prices have been heading in one direction: up.