Commercial Property Declines Show Signs of Easing

Declines across the nation’s commercial real estate sectors appear to be easing slightly as 2010 approaches, according to the Investment Trends Quarterly report, a study produced by the CCIM Institute and Real Estate Research Corporation (RERC).

Despite the positive signs, however, growth across the commercial property markets is expected to remain sluggish through at least the first quarter of 2010, followed by a potentially meaningful recovery during the second half of the year.

Overall, the Investment Trends Quarterly report notes several key trends. Transaction volume is increasing on a quarter-to-quarter basis for some property types, although it is still declining overall on a 12-month trailing basis. Third-quarter 2009 volume increases are reported in the office, retail, apartment, and hotel sectors, while the industrial sector volume was the only property type to see quarter-to-quarter volume decline.

In addition, while 12-month trailing prices declined slightly across the board during the third quarter, the report notes that pricing is beginning to inch up for several property types on a quarter-to-quarter basis.

The Investment Trends Quarterly captures market-specific data to determine the relative health of each of the major commercial property sectors, using a 1 to 10 rating system to grade existing investment conditions, with 10 being at the high end of the scale.

The retail and office sectors tied in the third quarter with a rating of 3.8. For retail, the rating was up from 3.4 in the second quarter, while the office sector also increased from 3.5 during the same period. The hotel sector ranked at the bottom of the survey with a 3.6 rating, but this was an improvement over the 3.4 rating in the second quarter.

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