New York, December 11, 2012 -- Moody's: Central business district (CBD) office real estate prices continue to outperform other core commercial sectors, reflecting strong institutional demand even as there was a 1.0% decline in core commercial overall as measured by the Moody's/RCA Commercial Property Price Indices (CPPI) for October.
CBD office prices increased by 9.6% and 17.4% over the last three- and 12- month periods, respectively, according to the report, "Moody's/RCA CPPI: CBD Office Outperforms Other Core Commercial Sectors, Reflecting Strong Institutional Demand."
"The CPPI national all-property composite price declined 0.5% in October as a 0.6% gain in apartment was offset by the decline in core commercial," said Moody's Director of Commercial Real Estate Research Tad Philipp. "Though commercial real estate prices have climbed 27.7% since the November 2009 trough, they remain 22.4% below the December 2007 peak."
The apartment sector has recovered to within 12.2% of its December 2007 peak level, while core commercial is 25.2% below its December 2007 level.
"Distressed transactions currently make up approximately one-quarter of recent repeat sales observations, down from approximately one-third between early 2010 and mid 2011," said Philipp. "Distressed transactions, which are included in the repeat sales data on which CPPI is based, have had a meaningful negative impact on price appreciation for the market as a whole."
He said prices excluding distressed transactions have regained 70.6% of their peak-to-trough loss, outpacing the 43.0% regained in Moody's national all-property index that includes distressed transactions.
"Aside from the six major metro areas as designated by the CPPI, we examined price performance in nine of the larger metro areas or combinations of metro areas within a region," said Philipp. "Four of them, South Florida, Philadelphia/Baltimore, San Diego and Seattle, outperformed the national all property index since June 2001."
Two areas, Denver and a composite of Dallas, Houston and Austin, have seen appreciation since June 2001, although less than that of the national all property index leaders.
Three of the largest of the non-major metro areas, Atlanta, Las Vegas and Phoenix, have prices below June 2001 levels. Las Vegas prices are 63% below their December 2007 peak, but appear to have formed a bottom within the last few months.
Composed of a suite of 20 indices, the Moody's/RCA Commercial Property Price Indices is a series that measures price changes in US commercial real estate through advanced repeat-sale regression (RSR) analytics. The indices use transaction data from Real Capital Analytics (RCA) and a methodology developed by David Geltner, a professor at the Massachusetts Institute of Technology, in conjunction with Moody's and RCA.
Moody's subscribers can access the report at http://www.moodys.com/research/MoodysRCA-CPPI-CBD-Office-Outperforms-Other-Core-Commercial-Sectors-Reflecting--PBS_SF309920***
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