Multifamily Prices Outperform All Other Sectors

After declining in four of the last five months, apartment pricing ticked up 0.1 percent year-over-year, according to Ten-X’s Commercial Real Estate Nowcast for November.
Source: Ten-X

Commercial real estate pricing ebbed for the second consecutive month in November, perhaps showing signs of pressure from rising interest rates and late cycle fundamentals. The Ten-X Commercial All Property Nowcast fell 0.2 percent from October, following September’s 0.1 percent decline, leaving the pricing index up just 0.7 percent from one year ago. Prices in all property segments declined in November, except for apartment, which was flat.

Industrial property prices resumed their downward trend after a one-month reprieve in October, falling 0.4 percent in November, leaving them down 2.3 percent from a year ago. With trade worries back to the forefront and the U.S. auto sector weakening, investors appear cautious about the segment. The Southeast was the only region where industrial prices showed significant strength in the month, with the Midwest the weakest, falling 1.1 percent month-to-month.

Office prices declined for the third time in the last four months according to the Ten-X Commercial Office Nowcast, dropping 0.2 percent from October, leaving prices up 3.2 percent from a year ago. Pricing was down in all regions except the Southwest in November. Southwest office prices have been a standout and now measure more than 20 percent above their year-ago level. Midwest office prices have been the weakest, and are down 7 percent year over year.

Retail pricing weakened in November, catching up to the onslaught of store closures and negative headlines. Retail prices declined 0.2 percent from the month prior and are now just 2.1 percent above their year ago level. This is the weakest annual growth rate in retail pricing since 2014. The Midwest saw the starkest decline, with retail prices falling 0.8 percent in November. The Southeast and Southwest also saw declines of 0.6 percent and 0.4 percent, respectively. The Southwest saw the only appreciable gain, with pricing inching 0.5 percent higher in the month.

After declining in four of the last five months, apartment pricing remained stable in November. The Ten-X Commercial Apartment Nowcast is now 0.1 percent above its year ago level, snapping eight months of annual decline. Apartment pricing was roughly flat in the West, Southeast, and Southwest, but declined 0.3 percent in the Northeast. The Midwest was the standout, with prices increasing 0.5 percent.

The Ten-X Commercial Hotel Nowcast fell for the fourth time in the last five months and is now just 0.2 percent higher than a year ago. The Midwest was the only region to show growth, with pricing increasing 0.5 percent on the month. The Northeast and Southwest saw the weakest performances, with pricing declining 0.6 percent and 1 percent from October, respectively.

Peter Muoio is the chief economist at Ten-X.