The US CRE market is gradually recovering as commercial property prices continued to stabilize in October on greater clarity about borrowing costs.
According to MSCI Inc., the Real Capital Analytics commercial property price index (CPPI) fell 1.5% year-over-year and 0.1% from September. The firm said rate cuts this Fall helped diminish uncertainty about inflation and borrowing costs that had previously depressed transaction activity.
The industrial index posted a significant annual increase in October, rising 7.6% year-over-year and 0.6% month-over-month. Meanwhile, apartment prices plunged 6.1% in October compared with last year and down 0.3% month over month, according to the index. MSCI said the 0.3% decline suggests a more moderate 3.7% annualized fall than the actual decrease. The retail index fell 1.9% year-over-year and 0.1% from September, which indicates a shallower decrease of 0.7% when annualized.
Central business district office suffered the steepest declines of all property sectors, falling 18.7% in October from a year ago, and down 0.2% from September. However, suburban office prices fell just 1.6% year-over-year and inched up 0.2% for the month. Both metrics indicate an improvement in the pace of the decline in the overall office of around 34% and 13% respectively compared with the corresponding period last year.
Prices in the six major metros (6MM) – which includes Boston, Chicago, Los Angeles, New York, San Francisco and Washington, D.C. – fell 2.9% in October from a year ago while non-major metros (NMM) dropped 0.8% over the same period. On a higher frequency basis, the NMM index fared better, rising 0.2% from September, while the 6MM index fell 0.4%, said MSCI.
The RCA CPPI is based on repeat sales transactions through October 2024.