What has become the usual news on CRE prices continues to be the case, according to an MSCI report; they were down now for the eighth month in a row. However, the rate decline slowed, “led by improvements in the industrial sector,” they wrote, adding that the RCA CPPI National All-Property Index was down 3.0% year-over-year and 0.2% over the moth prior.
Whether that’s a trend is yet to be seen. There are some property types, such as single-family build-to-rent, that have seen widespread rent increases — not the same as property prices, of course, but indicating areas of market strength.
But with the Federal Reserve signaling that rate cuts are far from the fast path, ongoing financing is unlikely to support higher prices. The more financing needed, the higher the expense, and so, the less appealing the prices, which would likely have to drop before attracting more buyers.
Some property sectors will perform better and others, worse, according to MSCI. “Prices in the industrial sector have rebounded in recent months, while higher borrowing costs coupled with the uncertainty around the future for space have continued to drag down office prices.”
For industrial, the RCA CPPI changes in March were 0.7% month over month, 2.2% over three months, and a 5.7% increase year over year.
Office, on the other hand, was a series of big slides. The one-month decline across the entire category was 1.0%. The three-month change was down 3.6%, with -16.6% over a year. Central business district offices fell faster: -2.1% in one month, -7.0% for three months, and -33.216.6% Suburban offices faced losses, but lower ones. They dropped -0.3%, -1.6% and -11.4%, respectively.
Although down 1.2% from a year ago, retail edged up 0.1% month-over-month and 0.2% in a three-month gain. Multifamily has seen losses, including -0.9% between February and March, -2.8% for the three-month period, and -8.4% over the previous 12 months. Even so, the pace of decline for apartment prices has decelerated in each of the last seven months. “Retail was the only sector other than industrial to post month-over-month growth, albeit just a 0.1% uptick.”
The largest losses for all types of CRE were those in central business districts: -0.5% for month-over-month, -1.5% for three months, and -5.2% over a year. For suburban, the numbers were flat for one month and three months, and down 2.0% for the year.
