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Wednesday, August 19, 2009

Moody’s: CRE Prices Off 36 Percent from Peak, Off 1% in June

by Calculated Risk on 8/19/2009 01:25:00 PM

From Bloomberg: U.S. Commercial Property Values Fall as Rent Declines Forecast

The Moody’s/REAL Commercial Property Price Indices fell 1 percent in June and are down 36 percent from their October 2007 peak, Moody’s Investors Service said in a report today.
“It’s too soon to call the bottom,” said Connie Petruzziello, a Moody’s analyst and co-author of the commercial property price report.

The Moody’s survey found a 4 percent increase in office prices in the second quarter compared with the previous three months ... Industrial properties ... fell 20 percent in the quarter, while apartments fell 16 percent and retail properties 8 percent.
I think the office prices increase was an anomaly. Other CRE prices fell much faster.

Here is a comparison of the Moodys/REAL Commercial Property Price Index (CPPI) and the Case-Shiller composite 20 index.

Notes: Beware of the "Real" in the title - this index is not inflation adjusted - that is the name of the company (an unfortunate choice for a price index). Moody's CRE price index is a repeat sales index like Case-Shiller.

CRE and Residential Price indexes Click on graph for larger image in new window.

CRE prices only go back to December 2000.

The Case-Shiller Composite 20 residential index is in blue (with Dec 2000 set to 1.0 to line up the indexes).

This shows residential leading CRE (although we usually talk about residential investment leading CRE investment, but in this case also for prices), and this also shows that prices tend to fall faster for CRE than for residential.