CRE Prices Roar Back, Led By Apartments, Industrial And Even Office

Commercial property asset prices continued to rise in June, led by the apartment sector, Real Capital Analytics reports.

The RCA National All-Property Index grew 9.8% in June compared with a year ago, the fastest rate since 2015, and was up 0.8% from May.

Apartment price growth, which slowed to as low as 6.9% year-over-year during the worst of the coronavirus pandemic, surged to 12% in June 2021.

Offices are enjoying price increases as well, despite uncertainty over the sector's future demand, RCA reports. The office sector index rose 6% in June compared to a year ago, its best performance since 2018.

Suburban office prices accounted for the entire increase, posting a 7.7% annual growth rate in June. Central business district office prices again declined, dropping 2.4% year-over-year.

The industrial sector, the darling of the pandemic, isn't slowing down. In June, prices in the sector were up 9.8% year-over-year. That is within the range (9% to 10%) that the rate has recorded almost every month since the beginning of the pandemic.

Even retail property prices continue to rise, according to RCA, up 3.2% year-over-year in June, an improvement compared with most of 2020 but still below the national rate of inflation for now.

There were some markets that experienced a drop in CRE prices in June, though they were more than offset by rising prices in most other places. The outer boroughs of New York City suffered a drop of more than 10% in commercial prices year-over-year, and apartment prices there were down nearly 20%.

At the other end of the spectrum, commercial prices shot up by more than 10% each in Tampa, Florida, and the Inland Empire of California, and they increased by more than 20% in Seattle. In Phoenix, the price of apartment assets shot up nearly 30% compared with June 2020, and Jacksonville, Florida; Raleigh-Durham, North Carolina; Atlanta; and San Diego all saw prices rise more than 10% year-over-year.

On the whole, RCA reports, U.S. commercial property prices didn't collapse because of the pandemic, with price growth merely slowing down temporarily. In Q2 2021, the company's national all-property index stands at a record high, fully 120% higher than the nadir experienced immediately after the Great Financial Crisis.

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