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IRVINE AND SILICON VALLEY, CALIF. – January 25, 2018 – Ten-X Commercial, the leading dynamic and data-powered online commercial real estate transaction platform, released its January Commercial Real Estate (CRE) Nowcast. The monthly pricing index, which combines Google Trends data, Ten-X Commercial’s proprietary transaction data, and investor surveys to indicate CRE pricing trends in real time, revealed that the commercial real estate sector kicked off 2018 with a whimper. Nationwide, commercial pricing in January fell 0.3 percent from December’s figures — the ninth consecutive month of contraction for the index. The pricing gauge now stands only 1.0 percent higher than a year ago.
“2018 started with another month of pricing declines across four of the five major property segments,” said Ten-X Chief Economist Peter Muoio. “Despite continued positive economic news including a surging stock market, solid economic growth and a new tax law that should benefit CRE, investor sentiment continues to be weak, leading to another month of pricing contraction for the sector.”
According to the Ten-X Office Nowcast, the office segment saw 0.6 percent growth in January, making it the only segment to post an increase for the month. However, this growth only partially reversed the sharp 0.8 percent decline from December and pricing in the office segment remains flat. Searches related to office demand fundamentals were a primary driver for this month’s increase, which correlates with the broader strength in economic indicators. The regional picture remains mixed with large gains in the Southwest and Northeast offsetting declines in the other three regions.
Apartment sector pricing continued to trend down according to the Ten-X Apartment Nowcast, posting 0.5 percent drop in January. This marks the seventh consecutive month of declines and brings apartment prices to just 1.3 percent above a year ago. Overall weakness in the sector stems from ongoing increases in the national vacancy rate and slowing rent growth. The Northeast was the only region to eke out a modest gain which was overshadowed by declines in other regions.
The hotel segment posted the largest monthly drop of all the segments, falling 1.1 percent from December and bringing annual growth to 1.7 percent. The Ten-X Hotel Nowcast has shown volatility from month to month as the segment faces negative investor sentiment, despite seasonally adjusted occupancies ending 2017 at the highest level of this cycle and continued, albeit slowing, room rate growth. Hotel pricing was weak across regions with only the Southwest showing a modest uptick.
Per the Ten-X Inudstrial Nowcast, industrial segment pricing also declined in January, falling 0.4 percent and bringing pricing down 3.6 percent year-over-year. Even with strong fundamentals, rent growth, strong demand and low vacancy rates, investor sentiment has shifted to be generally negative towards the segment. Potential changes to U.S. trade policy may be affecting investor outlook as a change could alter the path of fundamentals at a moment’s notice. The segment experienced the most weakness across the Northeast, West and Midwest regions.
Though the Ten-X Retail Nowcast showed surprising gains for the segment in late 2017, January brought a 0.2 percent month-over-month decline. The index is now 4.5 percent above year-ago levels and remains the strongest year-over-year growth among the five property segments. Retail fundamentals continue to tread water amid e-retail growth, with vacancies hovering around the 10 percent mark and rent growth remaining tepid. This month, the Midwest and the Southwest were the two regions posting small gains with the other three regions posting declines.
“The further declines in January demonstrate that commercial real estate investors continue to be wary,” said Muoio. “With pricing across all segments remaining at just 1.0 percent in 2017, we’ll be looking to see if recent tax cuts and strong economic fundamentals bring CRE pricing back up to positive gains throughout 2018.”
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.
About Ten-X Commercial
Ten-X Commercial is the nation’s leading dynamic and data-powered online commercial real estate transaction platform. Since 2009, the company has sold nearly 6,500 commercial properties totaling almost $18 billion. The company blends data-driven technology with industry expertise and its powerful marketing engine to precision-match assets, accelerate close rates and streamline the entire transaction process. Ten-X Commercial and its parent company, Ten-X, are headquartered in Irvine and Silicon Valley, Calif., with offices in key markets nationwide. Investors in the company include Thomas H. Lee Partners, L.P., CapitalG (formerly Google Capital) and Stone Point Capital.
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