Suburban Office Prices Skyrocketed In August

The US National All-Property Index hit a 13.5% year-over-year increase in August, rising 1.5% from July numbers. 

According to data from Real Capital Analytics, all four major CRE property types showed double-digit annual price growth last month, with apartments showing the largest gain at 14.7%. That’s the quickest rate since before the Great Recession, and prices for apartment properties jumped 1.6% over July figures.

Apartment prices posted a 14.7% gain, the fastest annual growth rate seen since the housing boom before the Global Financial Crisis. Prices for the sector increased 1.6% from July. Industrial followed closely behind, registering 13.6% year-over-year, while retail increased 12.1%, buoyed by strong growth in the grocery-anchored center segment.

Meanwhile, the office sector picked up to 11.2% annual growth, led by suburban office prices, which went up 14.8% during the same period. CBD prices posted a 3.7% decline, meanwhile. 

The office sector constituted 26% of sales volume in July, according to RCA data. But “sales of CBD properties remain muted because of uncertainty about office space use in urban areas,” the firm noted last month.

However, there are signs that might change in the future.  A recent Commercial Edge report noted that “high-quality and high-potential office assets have maintained investor appeal throughout the pandemic,” with office transactions totaling $45 billion so far this year. And Marcus & Millichap CEO Hessam Nadji told CNBC that he expects $5 trillion in excess capital will eventually get released into the market. “Even buyers of office space—they’re not out of the market,” he told CNBC. “They’re in the market, taking advantage of low interest rates way ahead of the recovery in every property type.”