IRVINE AND SILICON VALLEY, CALIF. – March 23, 2017 – Ten-X, the nation’s leading online real estate transaction marketplace, has released its latest Commercial Real Estate (CRE) Nowcast. The monthly pricing index, which combines Google Trends data, Ten-X’s proprietary transaction data, and investor surveys to forecast CRE pricing trends in real time, revealed that nationwide commercial valuations grew by just 0.1 percent during March, and have climbed just 0.5 percent since November. Pricing across commercial real estate has now risen 8.4 percent over the last 12 months, although the robust growth that characterized most of 2016 has now entered a prolonged slump, coinciding with the presidential election and federal interest rate hikes.
According to the Nowcast, the apartment sector remained a bright spot in the industry, posting a 1.2 percent gain in pricing during March – the strongest growth among any of the five CRE sectors. The sector has now increased an impressive 15.4 percent over the past year. Its continued growth comes despite stabilized fundamentals, tighter cap rate spreads and rising interest rates, all of which had suggested that apartment properties might be priced to perfection. The sector’s only weak spot lies in the West, but March brought particularly strong gains in the Midwest and Northeast. Nowcast survey results showed broadly positive sentiments, although Google trends and activity on the Ten-X marketplace were more mixed, which could indicate the beginning of a shift for the segment.
“All signs appeared to be pointing toward a slowdown in apartment valuations, but the sector has again demonstrated its resiliency by posting additional pricing gains,” said Ten-X Chief Economist Peter Muoio. “While pricing in other commercial real estate segments has stagnated due to economic uncertainty and shifts in consumer behavior, so far investors remain very active in this segment.”
The Ten-X Industrial Nowcast eked out a 0.2 percent increase in March, joining apartment as the only sectors to show growth during the month. The uptick marked the second straight month of growth for industrial, which has seen pricing jump 5.2 percent over the last year. Investors continue to view the segment favorably, owing largely to the industrial demand generated by e-retail and cloud computing. Uncertainty has risen around major port-related industrial properties due to potential federal policy changes, but that has yet to have any major impact on the market. Pricing trends varied geographically, with all regions but the Northeast moving up or down a few basis points.
Both office and retail saw pricing slip during March, posting declines of 0.1 percent and 0.3 percent, respectively. Both sectors have been moving sideways since November, and retail has now contracted slightly in each of the last three months. While the Office Nowcast is up a stunning 22 percent from a year ago, this is more indicative of the weakness in office pricing in early 2016, and its subsequent rebound, than overall health of the sector. Google search trends were decidedly negative for the office segment in March, while data from transactions on the Ten-X marketplace was also discouraging.
The Ten-X Hotel CRE Nowcast continued its decline by falling 1 percent in March. Pricing across the segment is now down 4.7 percent year over year, and 11 percent from its Fall 2015 peak. A closer look, however, reveals a more nuanced picture across regional lines, as overall declines were driven largely by drops in the Northeast and West. Those regions hold a number of global gateway markets being adversely affected by a strong dollar, impediments to foreign travel to the US, as well as generally robust supply pipelines. Other regions, particularly the Southeast, posted gains during March.
“Now four months removed from the presidential election, commercial real estate valuations remain in a lull as investors await more certainty on both the economy and the potential for sweeping federal policy changes,” Muoio stated. “As the Fed signals a series of rate hikes to come and key economic proposals stall in Washington, it appears the market may continue to stall until more clarity emerges.”
About the Ten-X CRE Nowcast
The Ten-X CRE Nowcast is a price index covering the entire U.S. commercial market, including individual price trends for each major market sector – office, multifamily, retail, industrial and hotel. It is based on data modeling developed by Google Chief Economist Hal Varian, who defines “nowcasting” as “contemporaneous forecasting” – the ability to predict what is happening as it occurs. Ten-X applies Varian’s theories by combining publicly available and anonymous Google Trends data with its own proprietary transactional data to create a model for accurately predicting current commercial real estate activity. This data is supplemented with “real human” input through the company’s partnership with Situs and their Real Estate Research Report (RERC).
Ten-X issues its CRE Nowcast monthly after combining transactional data, related online search activity indicating purchase intent and investor survey results. The company runs multiple versions of the Nowcast model and layers in additional variables every day to improve its accuracy in predicting pricing trends across CRE sectors in key U.S. markets. Future iterations will include regional, local and individual asset-based price indicators. By analyzing current market conditions as opposed to only historical data, Ten-X is able to provide more relevant and timely insight to real estate investors, economists and government entities alike.
Ten-X is the nation’s leading online real estate transaction marketplace and the parent to Ten-X Homes, Ten-X Commercial and Auction.com. To date, the company has sold 275,000+ residential and commercial properties totaling more than $46 billion. Leveraging desktop and mobile technology, Ten-X allows people to safely and easily complete real estate transactions online. Ten-X is headquartered in Irvine and Silicon Valley, Calif., and has offices in key markets nationwide. Investors in the company include CapitalG (formerly Google Capital) and Stone Point Capital. For more information, visit Ten-X.com.