CRE Investment Market is Clearly Improving

by CoyDavidson on February 2, 2011

MIT commercial property price index posts near-record 12% gain in fourth quarter

Transaction prices of commercial properties sold by major institutional investors gained 11.9 percent in the fourth quarter, and 19.3 percent for all of 2010, according to an index developed and published by the MIT Center for Real Estate (MIT/CRE). The Transaction Based Index (TBI) tracks the prices that institutions such as pension funds pay or receive when transacting commercial properties such as shopping centers, apartment complexes and office towers.

Both of these returns were the second highest in the history of the index, which goes back to 1984. (The record-holding quarter remains the second quarter 2005 which had a 17.8 percent gain, and 2005 was the record year with a 27.2 percent price increase.) Measured on a total return basis, including net income generated by the properties (as well as the price gain), the 2010 result was 25.2 percent, which was also second highest after 2005’s 32.2 percent. These results put the price index now within 27.9 percent of its 2nd-quarter 2007 peak value (measured as a fraction of that peak price). On an accumulated total return basis (including income) the index is now only 15.7 percent below its 2007 peak. The price index level now stands at 166.1 based on a value of 100 at the beginning of 1984.

CMBS Delinquency Rate Reaches Another Record High

In January, the delinquency rate for U.S. commercial real estate loans in CMBS jumped 14 basis points to 9.34% according to a report from Trepp, a leading provider of CMBS and commercial mortgage information. That is the highest percentage of loans 30+ days delinquent, in foreclosure or REO in the history of the CMBS market.

Trepp CMBS Delinquency Report Jan 2011

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