MIT TBI Shows 4.4% Quarterly Jump

The MIT Center for Real Estate Transaction-Based Index (TBI) numbers released for the third quarter has reversed course and shown a 4.4% jump from the previous quarter.

The 4.4 percent increase in the transactions-based index (TBI) for the third quarter is the first positive price change in the index in over a year, and the largest increase since before the market downturn began in mid-2007. While the price index is now 36.5 percent below its 2007 peak, it is not as low as the 39 percent deficit seen last quarter — suggesting that the U.S. commercial property market may have finally found a price bottom.

The TBI is an index which is based upon NCREIF properties which transact.

Despite the positive sign, it should be noted that the 3rd quarter NCREIF Property Index returns still continued to show a fall. Nationally, the 3rd quarter fall in the NPI was -3.32%, which came on the heals of a -20% fall for the previous three quarters (combined). These were the first quarters were the NPI showed negative returns since 1993.

The governments “extend and pretend” approach to CRE lending at this point will likely stabilize the market to a large extent. The top grade assets will attract international capital with the second tier assets and those with the ability to cover at least interest payments will also be helped by the FDIC guidance and general improving market sentiment.

The fallout however will likely continue for truly distressed assets, those with significant vacancies, rollovers from previously much higher rates, or some other level of distress.

Here is a slide show put out by JHP Capital outlining the uncertainty in the market from the debt perspective. It’s a bit old, but nonetheless does a good job of quickly going through the market and the uncertainty which continues to exist, which while it exits will likely prevent a meaningful rebound. Just look at the departing words in in the last slide, “when in doubt, stay out”.

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