NREI: CRE Valuations Are Trending Down, Green Street Researchers Warn
According to NREI:
Commercial real estate investors can expect that property prices will trend downward in the near future, according to Green Street Advisors, a real estate research firm headquartered in Newport Beach, Calif.
It’s a trend the industry is already starting to see. “Value appreciation has practically stopped in aggregate,” said Joi Mar, senior analyst at Green Street, in a webinar on Wednesday about the outlook for commercial property valuations. Green Street's Commercial Property Price Index dipped 1 percent in March and has seen little change over the past two years.
However, there are variations among sectors. Industrial—especially last-mile industrial—has seen rising values, and malls have seen big losses, she noted. Prices on industrial assets recorded an 11 percent gain year-over-year, but mall valuations have dropped by 15 percent during the same period, according to Green Street’s Commercial Property Price Index.
Two recent transactions in the mall sector—Brookfield Property Partners’ acquisition of General Growth Properties (GGP) and UnibailRodamco’s acquisition of Westfield Corp.—have dragged retail valuations down further, Mar said. While the Westfield deal suggested that mall cap rates were in the right ball park, the more recent GGP deal suggests that cap rates are 10 percent lower than thought, Mar noted. This caused Green Street to mark down its mall asset values by 5 percent on average.
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