While key liquidity indicators in the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – remain steady, a deceleration in deal activity is likely to result in more modest price growth as the second half of 2016 draws to a close, according to the most CoStar Commercial Repeat-Sale Indices (CCRSI).
The third quarter started on a strong note, the indices showed, as a combination of healthy market fundamentals, low interest rates and steady availability of capital in the U.S. and Philadelphia commercial real estate markets continued to fuel price growth during July.
This report on national and Philadelphia commercial properties was made through Philadelphia commercial real estate broker Wolf Commercial Real Estate, a Philadelphia commercial real estate brokerage firm.
Both the CCRSI equal- and value-weighted national composite price indices advanced in July. The value-weighted U.S. Composite Index, influenced by high-value trades, increased 1.3% from the previous month and 10.1% from the prior 12-month period, propelling the U.S. and Philadelphia commercial real estate properties index 25% above its prerecession peak level.
The equal-weighted U.S. Composite Index also increased 1.3% in July, contributing to an annual gain of 7.2% for the year-prior period as investors continued to seek value in properties beyond the primary U.S. markets. The equal-weighted index among national and Philadelphia commercial real estate listings has now advanced to within 1% of its peak before the recession.
Pricing in the General Commercial segment of the equal-weighted index, influenced by transactions involving smaller, lower-end properties, increased by 1.4% in July and 7.5% for the 12 months as strong capital flows continued across the entire spectrum of property in the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space. Although still up 2.8% for the 12-month period, and now within 1.1% of its prerecession peak, the Investment Grade index declined 1.4% for the month.
While transaction activity remains strong, the total composite pair volume of $68.9 billion year-to-date through July 2016 was 2.8% lower than the same period in 2015. The deceleration in trading is likely to contribute to more modest price growth for 2016 than the record pace of the last two years.
Two other CCRSI indicators signaled continued strong liquidity in the investment market encompassing U.S. and Philadelphia commercial real estate listings:
- The average time for-sale properties spent on the market dropped sharply, declining 20% in the 12-month period ending in July.
- Also, the ratio of sale price to asking price narrowed by 2.5 percentage points in the last 12 months to 95.3% in July, the highest reading for the ratio since August 2006.
For more information about Philly office space, Philly retail space and Philly industrial space or other Philadelphia commercial properties, please call 215-799-6900 to speak with Jason Wolf (jason.wolf@wolfcre.com) Leor Hemo (leor.hemo@wolfcre.com) or Lee Fein (lee.fein@wolfcre.com) at Wolf Commercial Real Estate, a leading Philadelphia commercial real estate broker that specializes in Philly office space, Philly retail space and Philly industrial space.
Wolf Commercial Real Estate is a Philadelphia commercial real estate brokerage firm that provides a full range of Philadelphia commercial real estate listings and services, marketing commercial offices, medical properties, industrial properties, land properties, retail buildings and other Philadelphia commercial properties for buyers, tenants, investors and sellers.
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