Industrial properties continue to be the darling of the U.S. commercial real estate market.
CRE prices were nearly flat in the second quarter compared to the quarter before, ticking down just 0.8 percent amid tariff and interest rate uncertainty, according to the Trepp Property Price Index, which is equally weighted among property types and price tiers.
Overall, commercial property prices are up more than 3 percent since 2022, but industrial assets have fared the best — up nearly 7 percent since 2022, according to Trepp’s index.
In the second quarter, industrial prices rose 0.3 percent quarter over quarter and 3.2 percent year over year, the second-highest gains among property types. As some investors question the impact tariffs are having on logistics assets, others may be using the time to pick up industrial space in the hopes of more manufacturing returning to the U.S.
Some companies may also be stockpiling goods ahead of any further changes to international supply chains, per Trepp.
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Office, which is still rebounding from work-from-home mandates, performed the best in the second quarter, according to Trepp’s equally weighted measure, as prices for those assets rose almost 0.5 percent quarter over quarter and more than 5 percent year over year.
However, Trepp has another price index that is value weighted, meaning it places a greater emphasis on larger sales. This index helps signal how the market is changing in terms of where capital is concentrated.
According to Trepp’s value-weighted index, the office sector’s prices were down 2.6 percent quarter over quarter, signalling waning investor confidence in the asset class. Since 2022, office prices have sunk almost 20 percent, according to this measure.
The industrial sector was the only one among Trepp’s value-weighted measurements whose prices rose in the second quarter — though by just 0.3 percent — compared to the first.
Like offices, the hotel industry is also not faring well.
Prices for lodging properties plunged 2.7 percent quarter over quarter and nearly 10 percent year over year, according to Trepp’s equally weighted index. And since 2022, prices have dropped almost 16 percent in the sector. (Trepp did not provide second-quarter value-weighted pricing for hotel properties.)