The commercial real estate industry is experiencing a period of see-sawing in asset values. While the three major CPPIs that track the market have stayed flat or showed slight declines during some recent month, they also registered minor increases during others.
In February, for example, the all-property CPPI tracked by ratings firm Moody’s and research firm Real Capital Analytics (RCA) went up by 1.0 percent compared to the month before. Every property sector except retail posted price increases during the time period, with the largest jump in the Central Business District (CBD)-located office sector, at 2.2 percent. The CPPI for the office sector in general experienced a 1.9 percent increase, while the industrial price index went up by 1.6 percent.
Retail properties, on the other hand, posted a price decrease of 0.7 percent.
The Moody’s/RCA index tracks commercial property prices based on repeat sales that take place two months prior to the publication of its reports.
The CPPI tracked by Newport Beach, Calif.-based research firm Green Street Advisors, on the other hand, registered a 0.5 percent decline in March. Similar to Moody’s/RCA’s findings, the firm’s research showed that mall and strip center properties were the ones to experience the most significant price decreases recently, at 2.0 percent and 1.00 percent respectively.
Green Street’s CPPI is based on unleveraged commercial property values captured from sales that are currently being negotiated or contracted.
Similarly, the value-weighted U.S. Composite Index tracked by research firm the CoStar Group, which looks at sales of large assets in core markets, showed a decline of 1.4 percent in February. The equal-weighted U.S. Composite Index, which looks at lower-priced properties in smaller markets, rose by 1.4 percent during the same month.
“The recent divergence likely reflects a maturing market cycle, especially for the high-value properties in core markets that led the recovery,” CoStar researchers note.
CoStar used repeat-sale methodology in its indices.