US commercial real estate prices take a dip in 2016

U.S. commercial real estate prices fell slightly in January and February driven by weakness in Manhattan, according to Real Capital Analytics data. The findings, along with a more pronounced drop in investment sales volume, are another warning sign that the market is slowing down.

“Anything that happens in Manhattan reverberates,” RCA’s Jim Costello told Bloomberg. Although commercial real estate prices overall fell by less than one percent each in January and February, prices for office buildings in major city centers have fallen by 5.2 percent since December.

Meanwhile, Cushman & Wakefield expects investment sales volume in Manhattan and surrounding boroughs to dip by as much as 30 percent in 2016 after a $75.5 billion year in 2015.

One culprit is weakness in the CMBS market, which has made it harder to finance acquisitions. “That type of debt is important for very large transactions,” Costello said. “Manhattan is an expensive place. Every deal is hundreds of millions of dollars.”

Still, observers argue that it’s too early for concern. “Pricing is slightly off the peak in certain circumstances,” said Doug Harmon, a broker at Eastdil Secured. “But those prices are still sensational.” [Bloomberg] – Konrad Putzier