Economy Watch: CRE Prices Continue Upward

By Dees Stribling, Contributing Editor

U.S. commercial real estate prices rose in October, supported by various positive trends, CoStar reported on Thursday. Most major property types continued to benefit from a dearth of spec construction, a firming economic recovery, and rising rental rates. Also, benchmark interest rates, such as the 10-year Treasury, continued to decline in October.

According to the company, its value-weighted U.S. Composite Index and the equal-weighted U.S. Composite Index increased by 0.8 percent and 0.9 percent respectively in October. The value-weighted index now stands 3.9 percent above its prerecession peak in 2007, reflecting strong competition among investors for high-end and large commercial properties.

While its recovery began later, the equal-weighted U.S. Composite Index, which is influenced by smaller property sales, has made solid gains and is now back to 2005 levels, CoStar said, although it remains 15 percent below its 2007 prerecession peak. Its improvement reflects the general movement of investment capital in search of higher yields into secondary markets and property types, as pricing for commercial property has escalated in the core coastal markets.

Conference Board indexes gaining ground

The Conference Board reported that its Leading Economic Index for the U.S. increased 0.6 percent in November to 105.5 (2004 = 100 for all of the organization’s indexes), following a 0.6 percent increase in October, and a 0.8 percent increase in September. The index, it would seem, is running on all cylinders

“Widespread and persistent gains in the [index] point to strong underlying conditions in the U.S. economic expansion,” Ataman Ozyildirim, economist at the Conference Board, noted in a statement. “The current situation, measured by the coincident economic index, has been improving steadily, with employment and industrial production making the largest contributions in November.”

The organization’s Coincident Economic Index increased 0.4 percent in November to 110.7, following a 0.2 percent increase in October, and a 0.3 percent increase in September. Its Lagging Economic Index for the U.S. increased 0.3 percent in November to 125.4, following no change in October, and a 0.1 percent increase in September.

Unemployment claims drop

The U.S. Department of Labor reported on Thursday that for the week ending Dec. 13, unemployment claims came in at an annualized 289,000, a decrease of 6,000 from the previous week. The four-week moving average was 298,750, a decrease of 750 from the previous week.

Wall Street gained more on Wednesday than on any single day since 2011, buoyed by the Federal Reserve’s attitude toward delaying interest-rate increases and some better-than-expected earnings reports. The Dow Jones Industrial Average gained 421.28 points, or 2.43 percent, while the S&P 500 and Nasdaq were up 2.4 percent and 2.24 percent, respectively.