Property Prices Rose in March, But Iran War Is Stymying Improvement

Commercial property prices rose 0.4% in March, a modest improvement that is being hindered by an elevated 10-year Treasury, according to the latest Green Street report. 

March’s increase is an improvement from a 0.2% rise in February, and prices have grown 2.6% over the last 12 months, according to Green Street’s Commercial Property Price Index. 

Among the primary property types, multifamily pricing fell 0.3% in March, industrial and office were flat, malls rose 1.1%, and strip retail rose 1%. Data center pricing was also flat last month, though it is up 6% over the last year, tied with healthcare for the best performance across the past 12 months.

Prices are still 15% below their 2022 peak across asset classes, and Green Street said they are being kept in check by the 10-year Treasury yield, which is used to determine borrowing costs for commercial real estate loans.

The Iran conflict is pushing Treasury yields up again after they had hovered around 4% for two and a half years. They fell below 4% in late February but started climbing after the war began, peaking at 4.4% on March 27, the highest the rate had been since last summer.

The 10-year Treasury is at 4.3% as of Tuesday afternoon. 

Commercial real estate prices aren’t likely to rise much higher due to the conflict, Green Street co-Head of Strategic Research Peter Rothemund said in a press release, and further interest rate cuts are also on hold. 

Even though the Federal Reserve has cut interest rates over the last year, reductions haven’t been as frequent as CRE hoped. Rates have held steady for the last two meetings and are expected to do so again at the April 29 meeting. 

The Federal Reserve’s wait-and-see approach as of late is driven by immigration crackdowns and seesawing tariff policies roiling the U.S. economy and pushing inflation back up. Spikes in oil prices since the Iran war began have worsened the trend.

Federal Reserve Chair Jerome Powell said during the March FOMC press conference that it’s too soon to know the U.S. economic effects the war will have.

The sector with the highest price increase in Green Street's report was manufactured housing parks, which grew 2% from February to March and 4% over the last 12 months. 

The Senate's new housing bill lifts regulations from manufactured housing and opens up new financing options for the sector. It is exempt from the bill's build-to-rent restrictions. 

Sen. Elizabeth Warren has been focusing on the business practices of housing landlords, and on March 30, she sent letters to 14 single-family and multifamily landlords probing their portfolios, rent increase and eviction frequency, and more. Warren said institutional investors increasing their housing holdings over the last three years has bumped up prices for Americans. Her deadline for responses is April 8.