Economy Watch: CRE Prices Up Slightly in February

The increase in investment prices marks the first gain after nine months of contraction, according to Ten-X's latest Commercial Real Estate Nowcast.

Source: February 2018 Ten-X Commercial Real Estate Nowcast
Source: February 2018 Ten-X Commercial Real Estate Nowcast

U.S. commercial real estate investment prices rose 0.1 percent in February—the first gain after nine consecutive months of contraction, according to Ten-X Commercial’s February Commercial Real Estate (CRE) Nowcast. Even with February’s pricing uptick, however, the Ten-X CRE Nowcast is now just 0.4 percent higher than a year ago, the smallest annual increase since the Nowcast’s inception.

The company combines Google Trends data, Ten-X Commercial transaction data and investor surveys to calculate CRE pricing trends.

Sector Performance

The Ten-X Industrial Nowcast posted the largest increase in February, with prices rising by 1 percent. The strengthening of the industrial economy in recent months has given investors renewed confidence that demand will continue, the company posited, but threats about tariffs and other trade barriers remain a risk for the segment.

Like industrial, pricing in the apartment sector edged up in February, according to the Ten-X Apartment Nowcast, posting a 0.4 percent increase after seven consecutive months of contraction. In the past year, apartment prices have remained essentially flat, with pricing just 0.2 percent higher than a year ago.

The Ten-X Retail Nowcast increased 0.1 percent in February, even as the sector’s headwinds, such as e-commerce and shifting consumer spending preferences, remain. The index is now a solid 6 percent above year-ago levels, far outstripping the annual gains of any other segment.

The Ten-X Office Nowcast experienced a 0.3 percent decline in February. Office pricing is essentially unchanged since early 2017, with year-over-year gains at a measly 0.1 percent. Also, hotel prices remains weak. The Ten-X Hotel Nowcast posted its seventh decline in ten months, falling 0.4 percent in February. Hotel pricing is now 0.9 percent lower than a year ago.