U.S. commercial real estate (CRE) prices fell 4.2% in March, as measured by an index from Moody's Investors Service and Real Estate Analytics LLC. This brings the sector to its lowest level since its peak in October 2007.
In March, there were 182 repeat-sales transactions totaling nearly $2.5 billion, a significant increase by both count and balance over February, says Moody's. It was second-highest number of repeat-sale transactions since 2008, exceeded only by the number recorded in December 2010. The index is now 47% below its October 2007 peak.
A high volume of distressed transactions are weighing on performance, says Moody's. In March, nearly one-third of all repeat-sales transactions qualified as distressed.
‘Given that it may take 12 to 24 months to foreclose on a property and execute an REO sale, there is a lag effect that results in fewer distressed transactions coming to market in the early stages of a downturn and an increased level in later stages (i.e., now),’ says Tad Philipp, Moody's director of CRE research. ‘Indeed, the post-peak low in price has been reached in the same period as a post-peak high in distressed transactions has been recorded.’
In additional indices published this month, Moody's quarterly national indices for the four property types all showed declines in first quarter: Industrial recorded the largest decline, at -7.7%; followed by office, at -7.1%; apartments, at -4.7%; and retail at -4.5%.
