Commercial Real Estate Price Growth Slows: Report

Price growth on U.S. commercial real estate eased away from its recent all-time highs in March, according to the Commercial Property Price Indices (CPPI) National All-Property Index data published by Real Capital Analytics (RCA).

What Happened: Last month’s CPPI National All-Property Index dipped by 0.4% from February, marking the first time since June 2020 that it recorded a month-over-month decline. On a year-over-year measurement, the index was up 17.4%.

The decline was attributed to a slowing in retail price growth. The index covering that sector fell 0.7% from February, its first downturn in two years. And while the index rose 16.3% from one year earlier, RCA observed there was “a slowing from the pace seen in recent months.”

In other commercial property sectors, RCA reported apartment prices experienced a 22.4% year-over-year increase and a 1.1% uptick from February. Suburban office properties saw a 9.3% year-over-year increase while commercial business district prices rose 7.5% after falling through much of 2021. The industrial property index had the strongest year-over-year performance with a 30.1% spike.

See Also: Housing Beat: Mortgage Rates Break The 5% Level; Buyers Settle On Smaller Homes

What Else Happened: Commercial property also continued to perform well for investors in commercial mortgage-backed securities (CMBS). According to data published earlier this month by Trepp LLC, the CMBS delinquency rate in March was 3.73%, down 14 basis points from February. March continued a decline in CMBS delinquencies that has been recorded in 20 of the last 21 months.

“In March, the hotel delinquency rate fell sharply, as loans in that segment continue to cure (or turn from delinquent to current status) at an impressive rate,” stated Manus Clancy, senior managing director and the leader of applied data, research and pricing departments at Trepp. “The delinquency rate on hotel loans fell to below 7%, down 95 basis points month-over-month. In the early months of the COVID-19 pandemic, the hotel delinquency rate surged to about 25%.”

Photo: Meredith P. / Flickr Creative Commons