Commercial Property Prices Continue to Drop in December
Growth from earlier that year continued to dissipate, says MSCI.
CRE property prices dropped 1.2% overall from November to December 2022, according to MSCI. Growth from earlier last year “continued to dissipate,” the firm reported. “The RCA CPPI National All-Property Index dropped 1.2% from November and slowed to a 0.9% annual growth rate.”
“The impact of higher mortgage costs and falling deal activity has been felt on pricing across the property types, though some sectors are showing more acute changes,” MSCI said. “In the fourth quarter of 2022, total U.S. deal volume fell 62% compared to a year earlier.”
The only sector that saw a month-over-month gain was industrial, with the index up 0.5% and annual growth, although having slowed, at a 12.2% rate. All other sectors that MSCI monitors were down.
Taking the biggest impact was multifamily. Prices were down 1.9% month over month. The annual growth rate, which earlier in the year reached above 20%, was down to 1.8%. In retail, prices were off by 0.5% from November and annual growth was down to 3.1%, although that type was the only to show an increase in deal activity last year.
Suburban offices were also down 0.5%, with an annual growth rate at 4.1%. Central business districts declined by less, 0.4%, but was the only type to show a total annual decline — 2.1% year over year.
“Prices in the 6 Major Metros fell 2.1% from a year earlier and 0.8% from November, marking the seventh consecutive month of negative month-over-month returns,” the firm reported. “Price growth in the Non-Major Metros slowed to a 2.6% annual rate, while prices fell 1.0% from November.”
In the last quarter of 2022, prices slowed for all the tracked property types but remained positive except for two. “The industrial subtypes took the two top spots for price growth in Q4’22. Both the warehouse and flex indexes rose at double-digit rates, up 11.8% and 11.6%, respectively.” That was down from more than 20% earlier in the year.
For the entire year, two types — mid/highrise multifamily and central business district office, saw declines in both price and transaction volume. Getting a bump in price but fall in deal volume were warehouse, flex, retail shops, suburban office, garden apartments, and full-service hotel. Limited-service hotel and retail centers had increases in both price and number of deals.
And looking at price changes by market for 2022, the biggest growth areas were from the South and West.