U.S. Commercial Property Values Decline For The First Time Since 2010 According To Ten-X Commercial Real Estate Nowcast

Lackluster performance in office and hotel segments drag down overall valuations

Feb 29, 2016, 12:29 ET from Ten-X

IRVINE, Calif. and SILICON VALLEY, Calif., Feb. 29, 2016 /PRNewswire/ -- Ten-X (formerly Auction.com), the nation's leading online real estate marketplace, has released its latest Ten-X Commercial Real Estate (CRE) Nowcast. The pricing index, which combines Google Trends data, Ten-X's proprietary transaction data and investor surveys to forecast CRE pricing trends in real time, reveals that commercial valuations in February decreased 26 basis points from January, a 0.3 percent drop.

"This February all-sector decrease, which was largely due to sizeable monthly price declines in the office and hotel segments, brings CRE valuations back to a level roughly on par with what we were seeing in November 2015," said Ten-X Chief Economist Peter Muoio. "While we've been reporting a gradual flattening in recent months, this is the first all-sector decline seen since January 2011, the baseline index period for our nowcast.

Office valuations dropped 270 basis points for the month, pulling year-over-year gains down to 3.3 percent, a stark comparison from its late-2015 year-ago growth pace, which was topping 12 percent. Hotel posted its fourth consecutive monthly drop, falling 133 basis points and lowering its annual gain to 5.2 percent, the lowest it's been since summer 2014. Many of the largest US hotel markets are grappling with dual-headwinds of reduced foreign travel spending related to the strong US dollar and massive run-ups in their new construction pipelines. Airbnb is also garnering more mainstream attention and market share, and looks to challenge traditional hotel operators for the long-term.

Meanwhile, three property segments saw valuations increase in February. Apartment valuations increased 109 basis points for the month, marking a 9.7 percent year-over-year increase and its strongest monthly gain since last June. Retail, which is now showing consistent gains, rose 91 basis points, an annual increase of 10.2 percent. Valuations in the industrial sector increased 93 basis points and reached an annual growth rate of 18.3 percent due mainly to the positive impact e-retail has had on warehouse and storage space demand. However, Muoio noted that a short term slowdown is likely.

"While we expect online retail sales to continue having a positive impact on industrial valuations, at least in the short-term, global economic shakiness and the strong dollar may disrupt trade flows, impeding demand for industrial space," he said.

February Nowcast Results: All price indexes are rebased at 100 from January 2011

Sector

Nowcast Index

Month-Over-Month %
Change

Year-Over-Year
% Change

Office

162.8

-2.7%

+3.3%

Apartment

184.3

+1.1%

+9.7%

Retail

167.8

+0.9%

+10.2%

Industrial

164.0

+0.9%

+18.3%

Hotel

200.0

-1.3%

+5.2%

All Property Types

175.8

-0.3%

+9.0%

About the Ten-X CRE Nowcast:

The Ten-X CRE Nowcast (formerly the Auction.com CRE Nowcast) is a price index covering the entire U.S. commercial market, including individual price trends for each major market sector– office, apartments, retail, industrial and hotels. It is based on data modeling developed by Google Chief Economist Hal Varian, who defines "nowcasting" as "contemporaneous forecasting" – the ability to predict what is happening as it occurs. Ten-X applies Varian's theories by combining publicly available and anonymous Google Trends data with its own proprietary transactional data to create a model for accurately predicting current commercial real estate activity. This data is supplemented with "real human" input through the company's partnership with Situs and their Real Estate Research Report (RERC). 

Ten-X issues its CRE Nowcast monthly after combining transactional data, related online search activity indicating purchase intent and investor survey results. The company runs multiple versions of the Nowcast model and layers in additional variables every day to improve its accuracy in predicting pricing trends across CRE sectors in key U.S. markets. Future iterations will include regional, local and individual asset-based price indicators. By analyzing current market conditions as opposed to only historical data, Ten-X is able to provide more relevant and timely insight to real estate investors, economists and government entities alike.

About Ten-X

Ten-X (formerly Auction.com) is the nation's leading online real estate marketplace, having sold 200,000+ residential and commercial properties totaling more than $37 billion since 2007. Leveraging desktop and mobile technology, Ten-X allows people to safely and easily complete real estate transactions entirely online.

Ten-X empowers consumers, investors and real estate brokers with unprecedented levels of flexibility, control and simplicity – and the convenience of buying and selling properties whenever they want and from wherever they are. As real estate continues to move online, Ten-X is uniquely positioned to be at the forefront of this dramatic behavioral shift.

Ten-X is headquartered in Irvine and Silicon Valley, Calif., and has offices in key markets nationwide. Investors in the company include Google Capital and Stone Point Capital. For more information, visit Ten-X.com.

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