Wednesday, August 19, 2009

Commercial Property Prices Drop 1%, Sales Volume Surges

Moody's and REAL Capital Analytics today released it's monthly commercial property report, which includes price data derived from transactions occurring through June 2009. I was planning on including the full report below, but apparently I had underestimated the technological prowess of Scribd, who emailed me about my copyright violation only seconds after uploading the document. Forgive me for assuming that a public posted document (you can download here) is hands off.

Anyways, the key message to take from today's report is that aggregate measures of commercial property prices continued to decline through June. The silver lining however, is that the May-June decline of 1% represents a substantial improvement from the 7% decline during the April-May period. Moreover, the significant lag in data reporting means that the price declines could have moderated further during July and August. Other relevant notes from the report:
  • All commercial property types, on aggregate, have declined 26.9% in price from a year ago
  • Atlanta was the top performing city across all property types (Office,Retail,Apartment,Industrial)
  • Washington DC was the worst performing city across all property types
  • The dollar value of sales volume increased 40% in June v May
The percentage declines in commercial property prices actually seem relatively mild when compared to the year over year declines in dollar value of sales volume. In June of 2008, the Moody's/REAL data recorded nearly $20Billion worth of commercial property transactions; by June 2009 that volume had dropped to $4.4Billion, or a 78% decline. Once again in real estate, we're faced with a dynamic where the headline data may indicate a high percentage increase from the previous month; however, the increase is only high in percentage terms because of the infinitesimally small base from which it's measured. The truly bearish of the world keep waiting for the commercial shoe to drop; hasn't it already? Sphere: Related Content

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