Price Growth For CRE Assets Grew At Historic Pace in October

Price growth for commercial real estate assets in the US grew at its fastest annual rate ever in October, as investors clamored for trophy properties.

The Real Capital Analytics CPPI National All-Property Index rose 15.9% from a year ago and 1.7% from September, according to the latest RCA data. In the year through October 31, investors poured $523.8 billion into commercial property assets, a 70% increase. 

More than $200 billion of that total was spent on apartments so far this year, double the activity for the same period in 2020. Experts posit that current pricing levels are substantiated by revenue growth, and predict apartments will continue to be a safe bet as the housing shortage will fuel ongoing demand.

More than $100 billion was spent on industrial properties, which saw the fastest annual and monthly price upticks of all sectors at 18.9% in October from a year ago and 1.9% from September.

Data from Marcus & Millichap pegs industrial prices as being up 22.3% over pre-pandemic levels, and says revenues are up by 11% while vacancies are at a low near 4%. 

“Investors are purchasing these properties based on rising demand driven by e-commerce and supply chain disruptions,” says John Chang, Senior Vice President and Director of Research Services at Marcus & Millichap. “But even though industrial absorption is at a record level, so is construction, and new development could ultimately bypass demand.”

The apartment index also increased 16.8% from a year ago, the fastest rate in the history of the RCA CPPI for the sector. Apartment prices went up 1.4% from September figures.

The office index also increased 13.7% year-over-year in October, marking the fourth consecutive month of double-digit growth for the sector.  Those gains were mainly driven by suburban office prices, which increased 15.6% over October 2020 numbers. The CBD office index also modestly rose 0.9% year-over-year.