The Real Deal New York

Despite slowing growth, US property values continue to rise: report

Cap rates flat amid lower transaction activity, according to Green Street Advisors

March 04, 2016 02:30PM
By Rey Mashayekhi

Green Street Advisors

Green Street Advisors’ Commercial Property Price Index

While property value appreciation has “slowed materially from the pace of last year,” Green Street Advisors’ national index of U.S. commercial property values rose 1 percent last month, according to a new report from the real estate research and advisory firm.

Green Street noted that cap rates “have flattened out over the past few months,” with the firm previously forecasting that the current commercial real estate cycle may reach its conclusion in 2016. The cycle has seen property values surpass their pre-recession peak in 2007.

“There’s been a slowdown in activity, but cap rates – at least for well-located properties – appear to be holding their ground,” Green Street senior analyst Peter Rothemund said in the company’s Commercial Property Price Index report Friday.

Rothemund added that transparency on property values “has diminished along with lower transaction activity” for commercial assets, and cited “reason for concern that lower-quality assets could be adversely impacted by turmoil in the [commercial mortgage-backed securities] market.”

But that has yet to lead to “hard evidence of a downturn in pricing” for commercial properties, he said, with Green Street’s national property value index up by 8 percent year-over-year last month and 24 percent above the previous peak in August 2007.

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