Bloomberg News

Moody’s U.S. Commercial Property Index Rose 2.4% in August

October 24, 2011

Oct. 24 (Bloomberg) -- U.S. commercial real estate prices rose in August for a fourth straight month as financially distressed properties made up a smaller share of transactions, according to Moody’s Investors Service.

The Moody’s/REAL Commercial Property Price Index advanced 2.4 percent from July. It’s up 7.2 percent from a year earlier and 15 percent from its post-peak low in April, the New York- based company said in a report today.

Moody’s doesn’t see “significant” price gains in the near term as loan originations based on commercial-mortgage backed securities slow and demand for vacant space continues to “languish,” the company said. A total of $49.8 billion of commercial property changed hands in the third quarter, down from $58.5 billion in the previous three months, New York-based research firm Real Capital Analytics Inc. reported last week.

“There’s more caution,” Robert Bach, chief economist for Grubb & Ellis Co., a Santa Ana, California-based brokerage, said in a telephone interview before the Moody’s report was released. “Investors in general are a little more cautious, and that includes investors in commercial real estate.”

Distressed Deals

The Moody’s index tracks repeat sales, which totaled 207 in August. It gives all property transactions the same weighting. The share of distressed deals was 21.7 percent, the lowest since January 2010. A distressed sale involves an asset in which a default, foreclosure proceeding or bankruptcy of the owner has occurred, according to Moody’s.

Other property price indexes have showed a slowdown. CoStar Group Inc.’s National All Property Type Composite Index slipped 0.5 percent in August from the previous month, the Washington- based real estate data provider said Oct. 12. The index was down 3.6 percent from a year earlier and is 34 percent below a peak reached in 2007.

Green Street Advisors Inc., a real estate research company in Newport Beach, California, reported commercial property values were unchanged in September from the previous month and advanced 15 percent from a year earlier. Prices are down 9 percent from their August 2007 peak, the company said Oct. 6.

Green Street’s index is weighted by asset value and includes deals that are in negotiation or under contract.

--With assistance from David M. Levitt in New York. Editors: Christine Maurus, Kara Wetzel

To contact the reporter on this story: Brian Louis in Chicago at blouis1@bloomberg.net

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net


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