Green Street

Commercial Property Price Index®

Pan-European Commercial Property Price Index

December 6, 2023

Property Prices Decline, But the End is Near

Newport Beach, CA, December 6, 2023 — The Green Street Commercial Property Price Index® decreased by 3.0% in November. The all-property index—a measure of pricing for institutional-quality commercial real estate—is down 22% from its March ’22 peak.

“The rise in bond yields that occurred in September and October essentially froze the transaction market,” said Peter Rothemund, Co-Head of Strategic Research at Green Street. “The good news is that bonds have staged an epic rally since, and commercial property is now fairly priced vs. corporate bonds. Property pricing may well have hit bottom.”

 

Learn more about the changes to our Commercial Property Price Index®

How is our index different than others that track commercial property prices?

Timeliness

Green Street's Commercial Property Price Index® is a time series of unleveraged U.S. commercial property values that captures the prices at which commercial real estate transactions are currently being negotiated and contracted. Features that differentiate this index are its timeliness, its emphasis on high-quality properties, and its ability to capture changes in the aggregate value of the commercial property sector. Learn more.

Green Street's Commercial Property Price Index is a time series of unleveraged Pan-European commercial property values that captures the prices at which commercial real estate transactions are currently being negotiated and contracted. Features that differentiate this index are its timeliness, its emphasis on average institutional quality properties, and its ability to capture changes in the aggregate value of the commercial property sector.

Green Street Commercial Property Price Index®

Green Street Commercial Property Price Index

Indexed to 100 in August 2007

Indexed to 100 in September 2007

All Property CPPI® weights: retail (20%), office (17.5%), apartment (15%), health care (15%), industrial (10%), lodging (7.5%), net lease (5%), self-storage (5%), manufactured home park (2.5%), and student housing (2.5%). Retail is mall (50%) and strip retail (50%).
Core Sector CPPI® weights: apartment (25%), industrial (25%), office (25%), and retail (25%).

Change in Commercial Property Values

Amount property values have increased over this period

December 6, 2023



What makes our Commercial Property Price Index® unique?

There are significant differences between the Green Street CPPI® and other indices that track commercial property prices. Green Street's CPPI® is appraisal-based. Appraisal-based indices are only as good as the valuation estimates used to construct them, and Green Street has long devoted sizable resources to deriving accurate estimates of the values of the properties owned by REITs. Most other indices are transaction-based.

Green Street's Pan-European Real Estate Analytics platform covers 25 of the most liquid European real estate markets across the industrial, office, retail, and residential property sectors. The Commercial Property Price Index is a time series of unleveraged property values across these sectors and markets, and captures the prices at which commercial real estate transactions are currently being negotiated and contracted. Features that differentiate this index are its timeliness, its emphasis on average institutional quality properties, and its ability to capture changes in the aggregate value of the commercial property sector.

Institutional Quality

Institutional Quality

Average Institutional Quality

The index is based on Green Street's frequently updated estimates of price appreciation of the property portfolios owned by the REITs in its U.S. coverage universe. Since REITs own high-quality properties, the index measures the value of institutional-quality commercial real estate.

The index is based on Green Street's frequently updated estimates of price for the property portfolios of a typical commercial real estate investor. It is driven by the fundamental models maintained by the research team, which, in turn, are driven primarily by changes in market cap rates and net rental income.

Timely

Timely

Timeliness

Our index reflects changes in commercial property values as soon as we hear about them. That's one of the benefits of an appraisal-based index; we don't have to wait for deals to close. Most other indices are based on closed transactions, so they convey information several months old.

The Green Street index value is based on where commercial real estate would transact today. Other indexes, based on either closed transactions or formal appraisals, may reflect market prices from many months earlier.

Value-Weighted

Value-Weighted

Asset Value Weighted

We place more weight on high-quality properties, e.g. a New York skyscraper has a much greater impact than a suburban strip mall. Because our CPPI® is value-weighted, it measures what’s happening to real estate prices in aggregate, similar to the Wilshire 5000 that measures what’s happening to the stock market in aggregate. Most property indices are equally-weighted.

Each sector index is created by GDP weighting individual market indexes. The sector indexes are then equal weighted to create the Pan-European Commercial Property Index. Akin to familiar stock price indexes (e.g., S&P 500), GDP value weighting provides a gauge of aggregate (as opposed to average) values. Equal-weighted indexes, by contrast, put the same emphasis on a Dusseldorf industrial building as they do a trophy London office building.