CRE Pricing Softens In Most Sectors As Investor Confidence Wanes In December

US commercial real estate pricing increased month-to-month by 0.3% in December, according to Ten-X’s latest CRE Nowcast report. That's the slowest growth the industry has experienced since June.

As the bulk of holiday shopping commenced, the retail sector experienced a rebound in pricing, jumping 1.4% during the month, though Ten-X quantitative strategist Matthew Schreck told Bisnow the increase was not solely due to the holiday season.

“It may be tempting to think that CRE pricing would see a boost around the holidays in the same way equity markets often do, but it’s not the case across all the property types,” Schreck said. “We do think the holiday shopping season played a role in the retail sector's strong monthly gain. (Still) the retail sector's operating fundamentals have been slow to recover during the cycle, and the sector continues to face serious headwinds like e-retail's ever-growing market share and shrinking space needs per customer.”

Rising consumer wages thanks to the robust labor market may provide a much-needed boost for the sector, Schreck said.

As the year came to a close, the other four commercial property sectors experienced either a decline or deceleration in pricing. Ten-X research showed the market is paralleling the bond market as prices continue to decline following November’s election and investors are treading carefully. Schreck said CRE valuations face an uphill climb this year as projected rising interest rates could potentially hurt real estate pricing.

“Conversations we’ve had with industry participants point to higher financing costs since the increase in rates following the election, already stalling and potentially derailing deals that were already in place,” Schreck told Bisnow. 

The online real estate marketplace uses proprietary technology, Google trends data and investor surveys to determine what's happening with CRE pricing in real time.