Commercial real estate prices have been on an upward climb for the last decade until they peaked in the second quarter of 2007 according to the MIT Commercial Real Estate Transactions-Based Index. The third and fourth quarters showed a downward decline of 8.2%. However, the first quarter 2008 demonstrated a small rise in commercial real estate prices of 2.1%. If you look at the last four quarters, prices have dropped only 1.0%.
Will this trend continue? Right now it is hard to tell because as of the end of April 2008 demand for commercial real estate has fallen 10.0% and supply has increased 8.6% since prices peaked in the second quarter of 2007.
The Total Return Index which includes the Price, Demand and Supply Indices have increased 3.0% during the first quarter of 2008 with a cumulative total of 2.4% since commercial real estate prices peaked in the second quarter of 2007. It will be interesting to see what the next quarter will bring.
Note: The TBI is a statistical methodology that produces estimates of price movements and total returns based on transactions of properties sold from the NCREIF Index database.
MIT makes no warranty or claim regarding the usefulness or implications of the index. It should also be noted that TBI results for the 1st, 2nd, and 3rd quarters of any year are considered preliminary and subject to revision until the calendar year is completed with the 4th quarter results.
The information provided here is the author’s own interpretation of the MIT Commercial Real Estate Transaction-Based Index and also makes no warranty or claim regarding the usefulness or implications of the index.
Michael Setunsky is the Broker and owner of Michael's Commercial LLC serving the Northern Virginia commercial real estate market. His more than 23 years of experience as a commercial real estate and business broker has earned him the distinction for being one of the top commercial real estate producers in the Mid-Atlantic Region. He also serves on the Mid Atlantic Real Estate Marketing Association's (MAREMA) Board of Directors, and is a Commonwealth of Virginia licensed Instructor. He teaches Pre-licensing, Post Licensing Education, Broker's and Continuing Education courses. Visit his company web site at http://michaelscommercial.com/.
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