Newport Beach, CA, December 6, 2016 — The Green Street Commercial Property Price Index was essentially unchanged in November. Property price appreciation has cooled this year. Prices have been stable over the past three months and are up a modest 3% this year.
“Pricing for some assets has been a little better, and others a little worse, but for the most part, values have dug in over the past several months,” said Peter Rothemund, Senior Analyst at Green Street Advisors. “That’s not so unexpected. I think most people knew that the years of doubledigit gains weren’t going to last forever.”
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.
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.
Our index measures what’s happening to the value of REIT-owned properties. As such, it’s a good gauge of what’s going on in the market for institutional-quality properties.
Our index is value-weighted. This means that we place more weight on high-value properties, e.g. a New York skyscraper has a lot bigger impact than a suburban strip mall. Because our index is value-weighted, it measures what’s happening to real estate values in aggregate, much like the Wilshire 5000 and other broad value-weighted stock market indices measure what’s happening to the stock market in aggregate. Most property indices are equally-weighted.
Our index reflects changes in valuations 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 from several months earlier.
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