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Thursday, August 19, 2010

Moody's: Commercial Real Estate Price Index declines 4% in June

by Calculated Risk on 8/19/2010 02:22:00 PM

Moody's reported (via Bloomberg) today that the Moody’s/REAL All Property Type Aggregate Index declined 4% in June. This is a repeat sales measure of commercial real estate prices.

Below 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. Moody's CRE price index is a repeat sales index like Case-Shiller - but there are far fewer commercial sales - and that can impact prices.

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).

It is important to remember that the number of transactions is very low and there are a large percentage of distressed sales.

Commercial real estate values are now down 41.3% from the peak in late 2007.

As I've noted every month, this is a very thin market that is skewed by distressed sales. For more, see John Murray at PIMCO's caution about the CPPI index: PIMCO U.S. Commercial Real Estate Project and MIT Professor David Geltner comments that appear on the Real Estate Analytics LLC website on the lower right under "Professor's Corner".

Note: there is also a new CRE index from CoStar, see: CoStar: Commercial Real Estate Prices decline sharply in June