US commercial real estate prices have fallen nearly 50% off their October 2007 peak, with prices hitting new record lows in August of this year. While smaller properties remain positive to flat, their returns have been offset by an increasing number of large distressed properties. See the following article from HousingWire for more on this.
Commercial real estate prices fell again in August to the lowest point since the beginning of the downturn, according to Moody’s Investors Service.
The ratings agency said its commercial property price index fell 3.3% for August and have now decreased between 3% and 4% for three consecutive months to levels below previous lows recorded in October 2009.
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CRE prices are now off 45.1% from a peak in October 2007, down 7.6% this year and at levels last seen in 2002, according to Moody’s.
“The commercial real estate market in the U.S. 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,” said Nick Levidy, managing director at Moody’s.
“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 said.
Moody’s commercial real estate prices are now 19% lower than the consumer price index since December 2000, but analysts expect the index to “revert to a long-term trend line close to that of the CPI.”
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