Market reports show that commercial property values in some sectors are beginning to inch back up from pre-pandemic levels. The trends will be important for property valuations and taxes in 2021.
Green Street CPPI
The Green Street Commercial Property Price Index increased by 1.8% in November and was unchanged in December. For the year, the all-property price index declined 8%. Since COVID began, lodging pricing is down 25%, mall pricing is down 20%, office pricing is down 9%, strip retail is down 13%, and health care is down 4%, according to Green Street.
“Property pricing has firmed up over the past few months,” said Peter Rothemund, Managing Director at Green Street. “In several sectors, it is above or close to pre-COVID levels and only the harder-hit property types remain down 10% or more. With interest rates this low, it is easy to see real estate prices increase from here.”
Real Capital Analytics CPPI
In another indication of a recovery in commercial values, Real Capital Analytics reported increases in its US National All-Property Index, which measured values in October compared with 2019 levels. The research found that commercial real estate prices continue to improve depending on the asset class.
The US National All-Property Index rose 3.6% from a year ago, the apartment index rose 7.2% and the industrial index 8.5%. Retail prices posted declines, down 5.2% from a year prior. The already-struggling sector was the first to register the impact of COVID-19, as annual price trends turned negative in April. Returns in the sector are currently at a low not seen since the end of 2010.
The office sector continued to fall at about a 1% annual rate. Suburban offices have led to that slide, falling 1.6% year-over-year, and posting five consecutive months of declining yearly returns.
The mixed bag of national trends may not fully coincide with what is happening in individual markets. It will be crucial for owners to understand specific data relating to their property and their local market to ensure that property valuations are not overstated.