CRE Pricing Shows 1st Monthly Drop Since January

Source: Ten-X

Commercial real estate pricing ebbed in October, posting its first monthly decline since January. The Ten-X Commercial All Property Nowcast fell 0.1 percent from September, resulting in muted growth of 0.9 percent from a year ago. The overall decline was only bucked by the Industrial segment, which showed modest growth on the month.

The industrial sector was the only property segment that saw growth this month, rising 0.4 percent from September. However, the industrial index remains 2.9 percent below its year ago level following weakness early in the year. Gains were strongest in the Northeast, which saw growth of 1.4 percent from a month ago, as well as the Midwest, which saw an uptick just under 1 percent from the month prior. Gains in the West were slightly slower at 0.5 percent. Southeast pricing remain stagnant, however, pricing in the Southwest contracted 1 percent, despite a positive oil pricing environment.

Retail remained flat in October from the month prior, leaving it 3.1 percent higher than a year ago. Retail pricing was strongest in the West, where it increased 0.8 percent in October from September. The Southeast also saw modest growth of 0.3 percent on the month, while all other regions saw pricing decline, albeit by less than 1 percent from the month prior.

Office declined 0.5 percent in October, paced by large declines in the Northeast and West. Pricing in the Northeast region declined 1.5 percent in October, while the West was slightly weaker with pricing falling 1.6 percent. The Southeast actually saw pricing increase in October, gaining 0.9 percent from the month prior. Pricing in the West and Southwest remained stagnant from the month prior.

Hotel declined 0.2 percent in October, weighed down by weakness in the Northeast. Pricing in the Northeast fell 1.5 percent last month and the Southwest pricing declined 0.4 percent. Pricing in the Midwest, West and Southeast all saw modest increases on the month of 0.5 percent or less.

Apartment pricing remains tepid, falling 0.2 percent in October from September. The weakness was most notable in the Southeast, where pricing declined 1.2 percent from the month prior. The Southwest and Northeast also saw pricing declines on the month of 0.4 percent and 0.3 percent, respectively. The Midwest saw fairly good growth of 0.9 percent, which dovetails with a rosier fundamentals outlook owing to lighter supply additions in the region. Pricing also rose modestly in the West region, gaining 0.2 percent in the month.

Peter Muoio is the chief economist at Ten-X.