Property Prices Continue Dropping

Property Prices Continue Dropping

Oct 19, 2009 - CRE News

Commercial property prices, as measured by the Moody's/Real Commercial Property Price Indices, or CPPI, are now 40.6% down from their October 2007 peaks.

The all property-type index fell 3% in August to 114.06, which is down 32.8% from a year ago. It marks the 11th straight month of decline in the index, which is calculated based on repeat sales of properties.

The national office index value actually increased in the second quarter by 4.1% from the first quarter to 128.96. But it's down 27.4% from two years ago. Each of the remaining property sectors - industrial, multifamily and retail - saw declines in the second quarter when compared to the first. Industrial values were down a whopping 20.4% from the first quarter to 131.3; multifamily was down 16.3% to 131.93, and retail was down 7.9% to 138.3.

And each of the regional indices tracked by the CPPI was down, with the greatest decline seen by apartments in the South, whose index value fell by 44.2% in the year ended June, to 82.86. Values are now 48.7% lower than in October 2007.

Florida apartments also continued to get clobbered, falling in value by 39.8% over the 12 months through June to 111.53. They're now 48.3% below their level two years ago.

Apartments in the East performed best, falling in value by only 6% over the year to 182.47. Their values are now down 10.5% from two years ago.

Meanwhile, the number of repeat sales used to calculate the CPPI remained relatively low, at 73 deals with a value of $950 million. That's of a total of 377 deals totaling $4.8 billion. July saw 74 repeat sales totaling $1.2 billion and June saw 87 deals totaling $1.1 billion. The index hit a low in May, when only 52 deals were recorded. In its analysis of the data, Moody's Investors Service noted that property prices today are lower than they would have been if, starting in December 2000, they increased only by the pace of inflation. They are now at the same level they were in June 2004.

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Neil Victor, CCIM is Senior Advisor with Sperry Van Ness Huntsville Office. Being part of the SVN organization offers us the most comprehensive commercial real estate marketing tools in the industry such as CCIM , Site To Do Business, Alabama Commercial Information Exchange, NALCOM, Listing Link and many other value propositions.