U.S. commercial property prices jump 5%

U.S. commercial real state prices rose again in July, but that’s far from a signal that the market is recovering. Citing Moody’s Commercial Property Price Index, BusinessWeek reported that prices rose 5 percent from June, and sit 1.2 percent higher than July 2010. Moreover, the index is almost 13 percent higher than where it stood in April, the post-bubble low.

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But the gains are coming from the rise in trades of smaller assets outside major markets such as Boston, Chicago, New York, Los Angeles, San Francisco and Washington, D.C. As yields on these properties rose so did demand, but recent signs of turmoil in the commercial-backed securities market mean investors may back off. Buyers of these properties typically rely very heavily on CMBS lending to complete the deals.

“This month’s gain is more a continuation of the bottoming process than a harbinger of recovery,” Moody’s reported. “Slow job growth will crimp expectations for the absorption of vacant space and for rent increases, which in turn will constrain near-term price increases.” [BusinessWeek]

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