Green Street Advisors

Commercial Property Price Index

June 6, 2019

Property Values Continue Upward at Inflationary Pace

The Green Street Commercial Property Price Index increased by 0.7% in May.  Over the past year, the index increased by 1.6%, in line with the modest pace of appreciation seen over the past three years.

“Commercial property pricing continues to follow the course of the prior three years, a path where cap rates have been stable and values have risen at an inflationary pace,” said Peter Rothemund, Managing Director at Green Street Advisors.  “That generalization is not true of all property types, however.  Those with strong rent growth — industrial and manufactured home communities — have seen large increases in prices, while retail, facing shrinking demand, has seen values fall.  Strip retail properties and malls are down about 10% and 20%, respectively, from their ’16 peak.”

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 Commercial Property Price Index

Indexed to 100 in August 2007

Download CPPI Report Download CPPI Data

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



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.

Institutional Quality

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.

Timely

Timely

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.

Value-Weighted

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.