CRE Prices Spike, Led By Nearly 19% Industrial Jump

U.S. commercial property prices spiked 15.9% in October compared with the same month in 2020 and 1.7% compared with September 2021, Real Capital Analytics found in its latest RCA CPPI: US report.

Industrial property prices are leading the way, rising 18.9% in October year-over-year and 1.9% month-over-month, the fastest annual and monthly rates among any major property sector. Apartments came in a close second, up 16.8% for the year and 1.4% for the month.

Office prices were up 13.7% annually, their fourth consecutive month of double-digit growth, according to RCA. Suburban office prices spurred most of the gain, increasing 15.6% from 2020. Central business district offices eked out a 0.9% annual gain after dropping each month for most of this year.

Driving the increases is a tide of investment dollars into U.S. commercial properties. By the end of October, investors had acquired $523.8B of CRE assets, a 70% increase compared with the same period in 2020, RCA reports.

Apartments attracted $200B from investors during the first 10 months of 2021, almost double the total compared with the same period in 2020. Industrial properties have attracted more than $100B so far this year.

The money continues to pour in. On Thursday, Longpoint Realty Partners, a Boston-based private equity firm, closed its second institutional fund, Longpoint Realty Fund II. The fund closed with about $669M in commitments, well above its initial target of $450M, and it will invest in industrial properties as well as neighborhood shopping centers.

Kayne Anderson Real Estate this week closed its sixth opportunistic equity fund with $2.75B in capital commitments. The fund will invest in student housing, senior housing and medical office assets.

The headline gain in CRE prices is the highest since RCA began tracking prices 20 years ago. In the mid-2000s, prices increased nearly 15% year-over-year for a short time, and then came crashing to as low as a 20% drop in prices during the Great Financial Crisis. 

By mid-2011, CRE began appreciating again, though never at the pre-recession pace of the 2000s. During the worst of the coronavirus pandemic in mid-2020, prices were still rising year-over-year, but by less than 5%.