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Moodys’ Commercial Property Price Index Increases 4.1% In December

February 22, 2010

Moody’s CPPI registered another gain for December. The index rose by 4.1% in December, following a 1% increase in November, marking the second consecutive month of increases.

Despite transaction volumes up dramatically over previous lows, and prices beginning to rise, Moody’s remains cautious on the future, citing in its report that “it would be naïve and aggressive to say that we’ve seen the worst”.

Though prices may be off their lows, there remains a lot of distress to work out in the marketplace. We’ve continue to emphasize the impact that resetting rents will have on property values, and we’ve all seen just how much it is costing landlords to land new tenants.

The good news is that the amount of fat left on deals is quite minimal, which will lend to stabilizing rental rates, at least in Silicon Valley. We’ve already seen some big deals signed, but over the next quarter we will see several high-profile lease transactions close as companies begin to make a “land grab” on the quality large chunks of space in the market.

The bad news is that the net absorption from these deals will be minimal, and as we’ve indicated will keep the pressure on the landlords of the B assets. As a value-add investor, one of the opportunities is therefore in the A asset (at the right price of course) with a large chunk of contiguous space as there will be takers for this space over the next 3-12 months. We’ve seen EOP and Lane Partners make some acquisitions over the past 2 months along these lines.

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Categories: Commercial Real Estate Investing | Market Data
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Cap Rate February 23, 2010

Scarcity premium!

LC Chase February 23, 2010

This is just a blip on the screen- I need to see a trend before I get too excited.

London Builders March 11, 2010

Thanks for sharing this info, I also include this industry last few years. Your posting is good..Thanks..

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