NEW YORK–While home prices continue to show appreciation, for the first time in nearly six years the value of commercial property in the U.S. has declined month over month.
The Ten-X Commercial Real Estate (CRE) Nowcast pricing index, which combines Google Trends data, shows that commercial valuations in February were down 26 basis points from January, or 0.3%.
“This February all-sector decrease, which was largely due to sizeable monthly price declines in the office and hotel segments, brings CRE valuations back to a level roughly on par with what we were seeing in November 2015,” said Ten-X Chief Economist Peter Muoio in a released statement. “While we’ve been reporting a gradual flattening in recent months, this is the first all-sector decline seen since January 2011, the baseline index period for our Nowcast.”
According to Ten-X, office valuations dropped 270 basis points for the month, pulling year-over-year gains down to 3.3%, a strong departure from its late-2015 year-ago growth pace, which had crested at 12%. Hotel values posted their fourth consecutive month-over-month decline, falling 133 basis points and lowering its annual gain to 5.2%, the lowest it’s been since summer 2014. Ten-X said that many of the largest U.S. hotel markets are dealing with a combination of reduced foreign travel spending as the result of the strong U.S. dollar, and massive increases in their new construction pipelines. Airbnb is also having an effect on hotel values.
Three commercial property segments did see valuation increases in February: Apartment valuations increased 109 basis points for the month, marking a 9.7% year-over-year increase and its strongest monthly gain since last June. Retail, which is now showing consistent gains, rose 91 basis points, an annual increase of 10.2%, and the industrial sector, which has 93 basis points and reached an annual growth rate of 18.3% due mainly to the positive impact e-retail has had on warehouse and storage space demand.