Research

Ten-X CRE Nowcast – October 2019

  • October 30, 2019

US commercial real estate prices are flat according to the Ten-X Commercial Real Estate Nowcast, as aggregate pricing held constant in October from a month ago but declined on a year-over-year basis for a third straight month. All five major property segments were listless yet again in October, showing only minor changes from a month ago as the late-cycle plateau persists. “Commercial property pricing is completely stagnant across the board”, said Peter Muoio, Ten-X Chief Economist and Head of Data Insights, “cap rate spreads seem to be rising in response to multiple interest rate cuts, keeping cap rates and pricing flat as we approach year-end.”

The Ten-X Commercial Real Estate Nowcast gauges real-time property pricing dynamics, providing buyers, sellers and lenders with information on the up-to-the minute state of the market by using live bidding and market activity data on the Ten-X Commercial platform, Google search trends and an ongoing live survey of investors by Situs/RERC. This enables a real-time view of pricing across the major property segments and regions of the country.

The Ten-X Industrial Nowcast fared the best among the five major segments in October, posting gains of 0.2% from September and 0.4% from a year ago. Regional results were mixed; prices declined in the West and Southwest while rising in other regions. Situs/RERC survey trends were decidedly positive in October, but Ten-X Commercial platform trends were negative and failed to back up the positive investor sentiment.

Ten-X Office Nowcast pricing was up 0.1% from a month ago, led by healthy gains in the Southwest, but declined 0.8% year-over-year. Office Google search trends and Ten-X Commercial platform trends were both largely negative, while survey responses were mixed in October.

The Ten-X Retail Nowcast saw the largest monthly decline with a 0.2% drop from September’s index level. Declines in the Northeast and West pulled down growth in the other US regions. Retail pricing also fell 0.3% from a year ago, the second straight month of annual decline on the heels of continuous growth dating back to 2011. Situs/RERC survey responses, Google search trends, and Ten-X Commercial platform activity were all more negative than positive in October.

Ten-X Apartment Nowcast pricing fell by 0.1% from a month ago, with only the Southeast region showing significant gains. Annual growth measured 1.3% and was positive for a 12th straight month, though the annual pace has slowed from earlier in 2019. Investor sentiment, per the Situs/RERC survey, was negative regarding cap rates but positive in terms of effective rent trends. However, Ten-X Commercial platform trends were lackluster.

The Ten-X Hotel Nowcast has now posted annual pricing declines in 19 of the last 21 months and saw the sharpest year-over-year decline among the five major segments with a 1.6% drop. Prices lifted 0.1% from a month ago, buoyed by gains in the West and Southwest regions, but the long-term downtrend remains in place. Hotel was one sector that saw positive Ten-X platform indicators, though Google search trends and investor survey trends were more mixed.

“CRE fundamentals have been generally weaker and lifeless in recent quarters,” said Chief Economist and Head of Data Insights Peter Muoio, “and this is being reflected in the lack of price movement. Investor concerns about a potential cyclical downturn aren’t helping matters either”.

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