MSCI: CRE Prices Rising At Fastest Pace In 3 Years

Commercial property prices grew across asset classes in October, recording the largest annual gains since 2022 after a pair of interest rate cuts from the Federal Reserve.

Prices rose by 4.2% from October 2024 across all property types, according to the latest MSCI Real Capital Analytics Commercial Property Price Index report. Macroeconomic factors suggest that momentum will continue as investors show an increasing willingness to spend more acquiring properties.

October is the fourth straight month of upticks, with prices rising by 0.8% from September. The growth period is the first since prices started to dip at the end of 2021, MSCI’s data shows.

Although the year began with cautious investor optimism and industry bullishness on interest rate cuts, that enthusiasm was tempered as the longest federal government shutdown in history curtailed the industry’s access to data, MSCI said.

That uncertainty showed up in a 22% month-over-month drop in dealmaking and is in line with Green Street's predictions at the start of the year. However, the overall October growth suggests investors are willing to drop more cash to acquire properties even as fewer purchases take place.

Industrial was the hottest asset class in MSCI’s report, with property prices growing by almost 5% year-over-year and 0.5% since September. Prices for the asset class have been gaining every month since May 2023 and have increased by more than 105% over the past 10 years. 

The national average for industrial vacancy was 6.6% in the third quarter, according to CBRE, and is plateauing as postpandemic oversupply gets slowly absorbed.

Retail prices have grown by 4.7% since October 2024 as demand for the asset class, coinciding with years of low construction, has the vacancy rate sitting around 5%, according to CBRE. 

Apartment prices rose for the third month in a row after sinking for almost three years. But the asset class was the only one of the four MSCI measured that didn’t post year-over-year growth, with the majority of quarters since 2023 recording decreases.

While record levels of apartment deliveries have begun to come down, rent growth was slightly negative in the third quarter, according to Newmark, and many multifamily landlords that have been exploring options to refinance their debt or sell themselves have instead been forced to liquidate because of the depressed market, Bisnow reported this week.