Commercial real estate activity is bouncing back and now looking more attractive as an investment. In contrast to the housing market, where sales are near the same level as when the recession ended two years ago, commercial property demand has rebounded, particularly in markets like New York, Washington and San Francisco. Commercial real estate transactions in the second quarter were more than double their level from a year earlier and quadruple the post-recession low of $12.9 billion in the first quarter of 2009, according to Real Capital.
Commercial real estate prices were little changed three of the last four months as “fear” crept into the market, Green Street Advisors Inc. reported on Oct. 6. Prior to the slowdown, prices had recovered three-quarters of the value lost after credit markets froze in late 2008, according to the Newport Beach, California-based property research company, which compiles its data from real estate investment trusts.
Third-quarter deals for office buildings, hotels, industrial properties, apartments and shopping complexes were up 38 percent from the same time in 2010, according to Real Capital’s report.
Pending home sales in California fell in September, as is typical for this time of year, but were up from the previous year for the fifth consecutive month. Additionally, distressed home sales increased slightly in September from both the previous month and year, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) reported today.
California pending home sales fell 5.2 percent in September, but were up from a year ago, according to C.A.R.’s Pending Home Sales Index (PHSI)*. The index was 118.5 in September, based on contracts signed in that month, down from August’s index of 125.0. The index was up 8.4 percent from September 2010. September marked the fifth consecutive month that pending sales rose from the previous year. Pending home sales are forward-looking indicators of future home sales activity, providing information on the future direction of the market.
“While recent pending home sales have increased from last year’s levels, housing inventory remains lean across all property types, particularly REOs (real estate-owned), which currently is at a 2.6-month supply,” said C.A.R. President Beth L. Peerce. “However, some major lenders recently announced they would accelerate the release of REOs onto the market, which should help alleviate the current shortage of housing inventory.”
The total share of all distressed property types sold statewide rose to 44.4 percent in September, up from August’s 43.7 percent and 43.6 percent in September 2010.