U.S. commercial property prices tumbled for a third straight month in August to the lowest level in eight years, pulled down by declining values for distressed real estate, according to Moody’s Investors Service.
The Moody’s/REAL Commercial Property Price Index fell 3.3 percent from the prior month to surpass the post-crash low in October 2009, the company said in a statement today. The measure is 45 percent below its October 2007 peak and is at its lowest level since June 2002.
The data suggest a “trifurcated” market, said Nick Levidy, a Moody’s managing director in New York. The August decline is partly because of negative returns on sales of properties with debt problems, he said. More than 25 percent of all transactions in the month involved real estate considered to be distressed, according to Moody’s.
Prices are “rising for performing trophy assets located in major markets, falling sharply for distressed assets, and remaining essentially flat for smaller healthy properties,” Levidy said in the statement.
Prices for the best buildings in New York, Washington, San Francisco, Boston, Los Angeles and Chicago -- markets favored by institutional investors -- rose 19 percent through July from October 2009, according to an analysis by the MIT Center for Real Estate in Cambridge, Massachusetts.
Commercial real estate prices will remain “choppy” in the next few months because of the relatively small number of sales and concern that the economy may slow, Moody’s said.
Moody’s measures overall commercial property values on a monthly basis and breaks the numbers down by property type once each quarter. The index measures the changes based on repeat sales transactions.
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