IRVINE, CALIF. — Commercial real estate values in the United States increased by 7 percent from April 2015 to April 2016, according to Ten-X, an online real estate marketplace.
The company has released its latest Commercial Real Estate (CRE) Nowcast. The pricing index, which combines Google Trends data, Ten-X’s proprietary transaction data and investor surveys to forecast CRE pricing trends in real time, reveals that commercial valuations increased by 0.6 percent month-over-month in April and are back above their year-end 2015 level.
The Ten-X CRE Nowcast (formerly the Auction.com CRE Nowcast) is a price index covering the entire U.S. commercial market, including individual price trends for the office, apartments, retail, industrial and hotel sectors.
“Even though the April all-sector increase is significantly stronger than the prior month’s slight gain of 0.2 percent, this still is the slowest annual growth rate from pricing for the cycle,” says Ten-X chief economist Peter Muoio. “April’s uptick in growth was seen across all major CRE sectors except hotel, where that segment’s fundamentals, as well as its pricing, continue dwindling. Meanwhile, the multifamily sector displayed the strongest pricing trends with a 1.8 percent gain in April.”
The Ten-X Hotel Nowcast dipped 1 percent from March to April, marking the sector’s sixth consecutive monthly decline. Hotels are now up just 0.5 percent year over year.
As hotel fundamentals and pricing steadily worsened, so did occupancies in the first quarter, as supply exceeded demand for the first time this cycle. Sagging Google search trends and lower pricing on the Ten-X platform also are contributing to the continued hotel decline.
Meanwhile, other CRE sectors are prospering, according to the company. The multifamily sector is the industry’s strongest, continuing to display the most promising pricing trends, as the Ten-X Apartment Nowcast shows a 1.8 percent gain in April.
The apartment Nowcast is up a healthy 8.9 percent year over year, but marks the sector’s lowest gain since March 2015. Apartment investors remain more cautious on cap rates than in past months, even while Google search trends and pricing on the Ten-X platform remain strong.
After three straight monthly declines, the Ten-X Office Nowcast reversed course in April, gaining 0.7 percent. It’s just 2.2-percent higher than a year ago, though. Stronger pricing on the Ten-X platform, improved investor outlooks and stronger Google search terms lifted the April Office Nowcast.
The retail and industrial nowcasts both saw gains in April. The Ten-X Retail Nowcast continued its steady gains with a 0.9 percent April increase, up 9.4 percent from a year ago.
Retail was lifted by higher investor expectations, while online search trends dragged.
Industrial saw a more modest 0.4 percent April gain, though it still remains a healthy 16.4 percent higher than a year ago — the strongest reading of any of the five CRE segments. Investors’ pricing expectations for the industrial sector remain strong, and Google search trends remain supportive of pricing gains.
— Haisten Willis