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U.S. commercial real estate values stagnate

5/13/2016 | Real Estate Blog

Philadelphia real estate investors should take note that U.S. commercial real estate values have stopped appreciating, according to an April report by real estate research firm Green Street Advisors. The news comes after six years of steady market growth.

The Green Street Commercial Property Index reports that property appreciation has “come to a halt” after years of double-digit gains. Even with the stagnation, values are 7 percent higher than they were in April 2015 and 23 percent higher than they were in August 2007, which was a pre-recession high. A senior analyst for Green Street says that values for properties that are lesser in quality and location have likely fallen from the start of 2016, but primary markets appear to be holding their value. Owners of prime real estate in Manhattan are still receiving top dollar for their assets. For example, the Chetrit Group just sold the Sony Building for more than $1.3 billion. Meanwhile, Thor Equities is reportedly selling an office building on Fifth Avenue for $525 million.

In April, Green Street reported that the national index had dipped less than 0.5 percent in March. It also noted a drop in transaction activity. At the end of 2015, the firm predicted that the commercial real estate market would become “more bearish” in 2016 and prices would recede throughout the year.

Timing is critical when buying or selling commercial real estate properties. In a changing market, real estate landlords and developers may find it prudent to consult with their attorneys before entering into an expensive transaction.

Source: The Real Deal, “US property value appreciation grinding ‘to a halt’,” Rey Mashayekhi, May 5, 2016