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U.S. commercial property prices in October notched their largest growth spurt in three years.
Compared to the same time last year, the RCA CPPI National All-Property Index climbed 4.2 percent, marking the highest annual rate since 2022. Month over month, the index edged up by 0.8 percent.
Optimism has strengthened in the sector thanks to improved financing conditions, but the recent government shutdown — and lack of government data — has cast more uncertainty over the economy, according to the index’s latest report. As a result, deal volume dropped by 22 percent in October compared to the same period in 2024.
Both on yearly and monthly bases, all of the major sectors that RCA tracks recorded price increases. The office sector once again notched the highest growth year over year, of 6.5 percent, and month over month. The asset class saw its pricing inch up by 0.8 percent in October compared to September.
Assets in both central business districts and suburban areas had relatively similar price growths, of 4.6 percent and 4.2 percent, respectively, year over year. However, CBD office properties continue to report the steepest pricing drops over the past three, five and 10 years among the commercial real estate sectors.
Some landlords in major cities are converting their office properties, many of which had been largely vacant during and after the pandemic, into residential complexes. This has led some tenants to scramble to lock in leases elsewhere, particularly at trophy, Class A properties. And while office construction plunged in recent years, it is starting to pick back up.Meanwhile, the apartment sector, continuing to work through issues with too much inventory in certain markets, experienced the weakest price growth year over year, of 0.5 percent. On a monthly basis, pricing for retail assets was the weakest, growing just 0.1 percent in October from September.