November 5, 2015 — The Green Street Commercial Property Price Index was unchanged in October. Commercial property prices have increased 8% so far this year, and are on pace to equal the 10% appreciation that occurred in 2014.
“Recent multi-billion dollar deals are making it clear that investor demand for commercial property remains strong,” said Peter Rothemund, Senior Analyst at Green Street Advisors. “But it is unclear how long that momentum can be sustained. When compared to yields available in the corporate bond market, today’s cap rates look low. The possibility of a modest decline in prices over the next year should not be ruled out.”
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.
Joseph Harvey, President & CIO, Cohen & Steers
IPE Real Estate Magazine August 10, 2010
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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