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Are CRE Prices beginning to drop?

Posted by Keith Darby on March 9, 2016
23 Comments

The commercial real estate market has remained consistently strong throughout the U.S. in the past several years. Prices doubled over six years, from 2009 to 2010. Last year, in 2015, commercial property values in the U.S. rose 10% on average.

The Moody’s/RCA Commercial Property Price Index reported that prices for commercial real estate in the U.S. dropped 0.3% in January, which is the first time a decrease has occurred since 2010. Office and Industrial buildings led the decline, with each seeing a price drop of more than 1%.

The decrease isn’t much, but it indicates a shift in investor sentiment. “This decline is our first tangible indication that investor demand is lessening throughout the country” says Keith Darby, RISE Realty President. Demand for commercial real estate is being hindered by the volatility in financial markets and falling rates of return, which have made it more difficult to obtain financing for transactions.

However the Commercial Real Estate market in Miami seems be stronger than than the U.S. average. In our market, we’ve seen asking rates increase due to limited supply of commercial real estate and low vacancy rates. Darby says, “Miami hasn’t seen the same declines the U.S. as a whole is reporting. We have a unique market where we are influenced by local, national and international financial situations and demand”.

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