All things must pass? CRE price growth expected to slow

Fed’s first interest rate hike in 9 years may have signaled end of a cycle

New York /
Dec.December 30, 2015 11:00 AM

Could the Federal Reserve’s interest rate hike this month prove the end of an era?

The Fed’s first interest rate increase in nine years may very well signal the end of a cycle that has seen 33 straight months of price growth of at least 10 percent in the commercial real estate sector, padding returns for office towers and luxury hotels alike.

While values aren’t expected to drop steeply, they also aren’t anticipated to climb much higher next year, according to industry analysts.

“A lot of the smart money is saying it’s a better time to sell than to buy,” Tad Philipp, a commercial property debt analyst at Moody’s Investors Service, told Bloomberg. “The warning light is on that the rate of appreciation is poised to decelerate.”

Helped by cheap debt, property values have surged over the past several years across the U.S. as global investors searched for yields and sought safe stores of wealth.

Commercial real estate prices now exceed their 2007 peak by 16 percent, according to a Moody’s and Real Capital Analytics index.

But real estate research firm Green Street Advisors noted this month that market signals “have become notably more bearish” and said it expects commercial property values to drift lower over the course of next year. [Bloomberg]Rey Mashayekhi


Related Articles

arrow_forward_ios
Larry Silverstein with 120 Broadway
Housing agency nabs two floors at Silverstein’s 120 Broadway
Housing agency nabs two floors at Silverstein’s 120 Broadway
From left: Adam Neumann and Marc Andreessen (Getty Images)
Adam Neumann raises $350M from a16Z for multifamily venture
Adam Neumann raises $350M from a16Z for multifamily venture
427 Broadway and Robert Frey (HGetty, THCNYC)
Former Vegas club owner bringing cannabis museum to SoHo
Former Vegas club owner bringing cannabis museum to SoHo
Mayor of New York City Eric Adams (Photo Illustration by The Real Deal with Getty Images)
NYC turns back to hotels to grow homeless shelters
NYC turns back to hotels to grow homeless shelters
Leonard Stern with Wyndham Garden Hotel Newark Airport (Getty, Hotels Combined)
Hartz buys Newark Airport hotel for $34M, plans demolition
Hartz buys Newark Airport hotel for $34M, plans demolition
Brookfield Property Partners CEO Brian Kingston and 660 Fifth Avenue (Brookfield Properties, Getty Images)
Major asset manager moves to 660 Fifth Avenue
Major asset manager moves to 660 Fifth Avenue
Cushman's Gary Gabriel and Adam Spies with one of the Long Island Industrial Assets (Cushman, Sherwood Equities, Getty Images)
Silverman grabs Sherwood industrial portfolio for $76M
Silverman grabs Sherwood industrial portfolio for $76M
50 Pennsylvania Avenue (LinkedIn, Pennrose)
Supermarket nabs 20K sf at Pennrose project in Brooklyn
Supermarket nabs 20K sf at Pennrose project in Brooklyn
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...