Commercial Real Estate Index Registers First Annual Drop
New data from Moody’s shows that commercial real estate prices registered their first year-on-year decline in April and that loans from 2007 declined in value for the second straight month.
As measured by Moody’s/REAL Commercial Property Price Indices (CPPI) prices fell a record 3.0% in April from the month before, lowering the index to a level 2.8% below what it was a year earlier.
This is the first time the CPPI has shown a year-over-year decline since its launch.
Moody’s notes, however, that the CPPI still shows a 9.1% increase in prices over the last two years.
The three leading office markets continue to show strength compared to a year ago, with prices up 12.2% in New York, 11.7% in San Francisco, and 10.8% in Washington DC. Overall, offices in the East showed a strong 14.3% increase in prices from the year before.
Moody’s quarterly figures show Apartment prices showed the largest nationwide decline during the first quarter, registering a 3.4% drop from a year earlier. Industrial properties were down 3.0% and Retail properties fell 1.2%, while Office properties were up 1.8% from a year earlier.
With the attention on refinancing existing mortgages on commercial real estate, the Moody’s/REAL CPPI suggests that loans from 2004 have increased in value by nearly 39%, on average; those from 2005, 16%; and 2006 loans are still 7% above the average value for that year. However, for the second month in a row, average prices on 2007 loans have decreased relative to the most recent index, falling 3.2% in April..
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