Commercial Real Estate Sees Gains

Ten-X has released its latest Ten-X 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 0.3 percent month-over-month in May, a 5.8-percent increase from one year ago after a positive gain in April helped reverse a few soft months to open 2016.

“We are seeing signs of renewed vigor in commercial real estate pricing after a quiet winter period, now that the financial market volatility seen during the first few months of 2016 has dissipated,” said Ten-X Chief Economist Peter Muoio. “Positive growth in the apartment sector helped fuel May’s nowcast, where that sector’s gains were the strongest — something that is also evident due to robust pricing seen on the Ten-X online sales platform.”

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May’s apartment sector nowcast is up 0.7-percent from the previous month, the strongest across all five major CRE sectors. The apartment sector has averaged month-over-month gains of 1.7 percent over the past three months and is now up 7 percent year over year. Google search activity is softer, though, and apartment vacancies increased 10 bps in Q1, signaling the third consecutive 10 bp increase. Rent growth remains strong, though appears to be decelerating.

The only CRE segment decline in May was found in industrial, which fell 0.7 percent, reflected by both weaker pricing on the Ten-X platform and a drop-off in relevant Google search activity. Meanwhile, the other major sectors are improving.

After six consecutive declines, the hotel sector showed a May increase, signaling a more bullish view by survey respondents about hotel fundamentals and valuations. The Ten-X Hotel Nowcast still is slightly below its year-ago level, due to the earlier string of declines.

The Ten-X Retail Nowcast saw a 0.6-percent gain in May, marking the second strongest month-over-month increase among the property segments. Google search activity related to retail was flat for the month, though, and the sentiment gain could reflect a broader improvement in sentiment that included retail as capital markets have improved from their early year swoon. Overall, retail is up just 5.5 percent year over year. The office market, meanwhile, continues showing signs of soft, positive growth. The Ten-X Office Nowcast shows a month-to-month increase of 0.4 percent in May. Office is now up only 1.6 percent over the past year, reflecting the slow-motion recovery in office fundamentals.