Property Pricing Steady
Newport Beach, CA, February 6, 2017 — The Green Street Commercial Property Price Index was unchanged in January. Property prices are up 3% over the past year, though appreciation has slowed more recently. In aggregate, values are flat over the past several months.
“Property pricing appears to have reached a plateau,” said Peter Rothemund, Senior Analyst at Green Street Advisors. “Cap rates are slightly higher than they were three months ago, but growing rental income has offset that — values have been steady.”
Green Street’s Commercial Property Price Index is a time series of unleveraged U.S. commercial property values that captures the prices at which commercial real estate transactions are currently being negotiated and contracted. Features that differentiate this index are its timeliness, its emphasis on high-quality properties, and its ability to capture changes in the aggregate value of the commercial property sector. Learn more.
Change in Commercial Property Values
Amount property values have increased over this period
What makes our commercial property price index unique?
There are significant differences between the Green Street CPPI and other indices that track commercial property prices. Green Street’s CPPI is appraisal-based. Appraisal-based indices are only as good as the valuation estimates used to construct them, and Green Street has long devoted sizable resources to deriving accurate estimates of the values of the properties owned by REITs. Most other indices are transaction-based.
The index is based on Green Street’s frequently updated estimates of private-market value for REIT portfolios across the five major property sectors (apartment, industrial, mall, office and strip retail – aggregate asset-value of $600 BN). Since REITs own high-quality properties, the index measures the value of institutional-quality commercial real estate.
Our index reflects changes in commercial property values as soon as we hear about them. That’s one of the benefits of an appraisal-based index; we don’t have to wait for deals to close. Most other indices are based on closed transactions, so they convey information from several months earlier.
We place more weight on high-quality properties, e.g. a New York skyscraper has a much greater impact than a suburban strip mall. Because our CPPI is value-weighted, it measures what’s happening to real estate prices in aggregate, similar to the Wilshire 5000 that measures what’s happening to the stock market in aggregate. Most property indices are equally-weighted.