CRE Market Price Growth Continues To Slow According To Auction.com Commercial Real Estate Nowcast
Second consecutive month of modest growth precedes Federal Reserve rate hike announcement
IRVINE, Calif. and SILICON VALLEY, Calif., Dec. 17, 2015 /PRNewswire/ -- Auction.com, the nation's leading online real estate marketplace, has released its latest Auction.com Commercial Real Estate (CRE) Nowcast, which reveals that commercial valuations in November have increased 46 basis points from October.
Despite the recent slowing in month-to-month price gains, year-over-year CRE pricing still shows healthy increases, and three property segments saw valuations increase in the month according to the new pricing index, which combines Google Trends data, Auction.com's proprietary transaction database and investor surveys to forecast CRE pricing trends in real time. Industrial valuations showed the strongest increase in the month, increasing 2.7 percent and bringing the nowcast level 17.6 percent above the year ago level. Office valuations increased 47 basis points and retail increased 41 basis points. Hotel valuations were off slightly, down 15 basis points, while apartments saw the most substantial decline, down 67 basis points for the month. This was the third consecutive month of lower prices in the apartment sector, perhaps signaling the cooling off of what had been a white-hot market segment.
"While there are significant differences in pricing across each of the individual property segments, year-over-year price growth remains healthy across all CRE sectors and sales volume remains relatively strong," said Peter Muoio, Auction.com Chief Economist. "Overall, prices have appreciated by 12.9 percent according to the nowcast – an almost identical figure to the prior six months. Interestingly, investors seem particularly bullish on the industrial sector, which has shown a healthy year-over-year increase."
All of this happened prior to the announcement by the Federal Reserve on Dec. 16 that it planned to raise rates for the first time in nine years.
"It will be interesting to see what effect higher capital costs have on CRE sales volume and pricing," said Auction.com Executive Vice President Rick Sharga. "The availability of low cost capital has been one of the elements fueling the CRE market for the last few years, and in some cases we've seen prices outpace the underlying fundamentals with investors buying properties with relatively low cap rates and relatively high risk premiums."
November Nowcast Results: All price indexes are rebased at 100 from January 2010
| Sector |
Nowcast Index |
Month-Over-Month % |
Year-Over-Year |
| Office |
168.7 |
+0.5% |
+12.5% |
| Apartment |
180.6 |
-0.7% |
+12.1% |
| Retail |
164.6 |
+0.4% |
+9.6% |
| Industrial |
154.5 |
+2.7% |
+17.6% |
| Hotel |
210.9 |
-0.1% |
+13.3% |
| All Property Types |
175.9 |
+0.5% |
+12.9% |
About the Auction.com CRE Nowcast:
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. Following Google Capital's investment in Auction.com last year, the company consulted with Varian and applied his 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 Auction.com's partnership with Situs and their Real Estate Research Report (RERC).
Auction.com issues its CRE Nowcast at the beginning of each month 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, Auction.com is able to provide more relevant and timely insight to real estate investors, economists and government entities alike.
For more information, please visit www.auction.com/CREnowcast.
About Auction.com:
Auction.com, LLC, is the nation's leading online real estate marketplace. Founded in 2007, the company has sold more than $34 billion in residential and commercial real estate assets. Auction.com has over 900 employees and headquarters in Irvine and Silicon Valley, California, as well as offices in key markets nationwide. Visit www.auction.com for more information.
SOURCE Auction.com
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