Yahoo Finance Commercial Property Prices Rose to Pre-Recession Levels
REIT Indicators—Everything Investors Need to Know
Property prices were up in July
The Moody’s/RCA (Real Capital Analytics) Commercial Property Price Indices (or CPPI), which is a national all-property composite index, gained 14.9% in July YoY (year-over-year). On a monthly basis, the commercial property prices experienced a gain of 0.7% in July. The commercial property prices have now risen for 66 consecutive months.
The Moody’s/RCA Commercial Property Price Indices measure price changes in US commercial real estate based on completed sales of the same commercial properties over time. Investors can use the index when evaluating companies like Simon Property Group (SPG), Public Storage (PSA), Equity Residential (EQR), and Ventas (VTR). Simon Property Group (SPG) forms 8.16% of the Vanguard REIT ETF (VNQ).
The office segment witnessed the highest price appreciation
Among the national all-property composite segments of CPPI, the growth in office prices was highest over the past 12 months. Office property prices rose by 18.2% during the last year followed by commercial property with a gain of 15.1%, apartments with a gain of 14.3%, retail with a gain of 12.9%, while industrial prices rose by 10.5% during the same period. Improving economic fundamentals, higher demand outpacing supply, and the rising liquidity due to still lower mortgage rates ushered a buoyancy in the commercial real estate market.
Deal activity soared
Higher demand led to higher deal activity in commercial realty. According to Real Capital, the value of US commercial real estate transactions in 1H15 soared 36% YoY to $225.1 billion. The investor’s fascination for commercial property in recent years can be attributed to factors such as low interest rates, higher business activities, and greater liquidity in the system.
In the next article, we will look at the capitalization rates and their impact on REITs.
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