Green Street

Commercial Property Price Index

Pan-European Commercial Property Price Index

January 7, 2022

New Year, New Highs

London, 7 January 2022 - The Green Street Commercial Property Price Index increased by 2.2% during the fourth quarter of 2021.  The index, which measures pricing of a broad swathe of Pan-European commercial properties, notched another new high, increasing 10% overall in 2021.  Industrial values continue to go vertical, gaining over 5% in the most recent quarter.  Residential values ticked up ~3.0% as investors appreciate the income stability.  Declining yields drove office values above pre-pandemic highs, while retail values remain flat.

“2021 was a banner year for commercial real estate with asset values rising about 10%,” said Peter Papadakos, Managing Director at Green Street. “Commercial real estate benefitted from uncompetitive fixed income yields and rising inflation expectations. At the sector level, industrial continues to benefit from robust demand and asset values rose about 25%. On the opposite end of the spectrum, retail values were flat overall as investors continue to take a wait and see approach. The current macro backdrop provides some uncertainty with volatile movements in fixed income yields, however, the direction of Green Street’s next CPPI publication is likely higher.”

Take a look at our U.S. Commercial Property Price Index

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

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

Indexed to 100 in August 2007

Indexed to 100 in September 2007

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Core Sector Average is equally-weighted between the Industrial, Office, Residential, and Retail sectors.

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Change in Commercial Property Values

Amount property values have increased over this period

7 January 2022



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.