IRVINE AND SILICON VALLEY, CALIF. – June 28, 2018 – Ten-X Commercial, the nation’s leading online and only end-to-end transaction platform for commercial real estate, today released its June 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 commercial real estate pricing rose 0.3 percent in June, the index’s fifth consecutive monthly gain.
“The positive pricing direction can be attributed, in part, to the fact that upward pressure on interest rates abated in June as U.S. 10-Year Treasury yields dropped below 3 percent,” said Ten-X Chief Economist Peter Muoio. “With a range of macroeconomic factors pointing upwards, it’s not surprising to see positive pricing momentum.”
Compared to June 2017, the Ten-X CRE Nowcast posted a modest 0.2 percent decline. June also marked the third consecutive month in which the index has seen a year-over-year drop. Before April, the index had posted continuous year-over-year growth since its inception in January 2011.
June’s month-over-month pricing gains were buoyed by the office segment, which saw its pricing climb a substantial 1.2 percent. Remaining segments posted negligible pricing fluctuations, with retail and hotel increasing in muted fashion and apartment and industrial posting declines.
The Ten-X Office Nowcast’s increase was the segment’s largest monthly pricing gain since late 2016, bringing the index a solid 2.4 percent higher than a year ago. Investors are positively appraising the sector’s value versus current pricing, according to the Situs survey data. Data from Live Bid events on the Ten-X platform was more mixed in June after appearing to be largely negative last month. Pricing gains were spread across all regions but were most pronounced in the Northeast.
The Ten-X Hotel Nowcast bounced back from two straight monthly declines, with a 0.4 percent monthly pricing increase in June. The Nowcast remains 0.5 percent lower than a year ago, however, and the index has declined in a majority of months dating back to late 2017. With hotel fundamentals highly correlated to U.S. economic conditions, the market will likely thrive as long as the labor market and GDP continue to grow. Hotel pricing increased in all regions except the Northeast, and investor sentiment via the Situs/RERC survey was largely positive this month.
The Ten-X Retail Nowcast continues its consistent run of growth and its 0.1 percent pricing gain in June marked the 12th increase in the past 13 months. The Nowcast is now up a solid 3.9 percent from a year ago. Although investor sentiment was largely negative in June, per the Situs survey, Ten-X platform trends were predominantly bullish. Pricing trend trajectories differed sharply along regional lines. Pricing in the Northeast and Midwest increased 1.8 percent and 1.1 percent, respectively, while the Southwest saw a 1.1 percent decline.
The Ten-X Apartment Nowcast found that pricing fell 0.3 percent in June, bringing the index 2.1 percent lower than a year ago. Vacancies are climbing across a majority of key markets as supply additions become available late in the cycle. Google search trends and Situs survey data both show that investor sentiment is negative toward the apartment sector, though Ten-X platform activity remains mixed. Pricing only increased in the Midwest, while the other four regions posted declines.
The Ten-X Industrial Nowcast noted that pricing fell 0.1 percent in June and has now declined in three of the past four months. Both prevailing sentiment and recent fundamentals in the sector are strong, yet the pricing climate shows weakness. The sector’s Nowcast is down 4.6 percent year-over-year, the worst annual performance among all five sectors. Per the Situs/RERC survey, investor sentiment was soft again and Ten-X platform trends show similar weakness in bidding activity. Trade-related uncertainty has mounted significantly in the past few weeks, including multiple rounds of back-and-forth tariffs with China. Industrial sector pricing increased modestly in the Midwest and West but declined in the three other regions, including a heavy loss in the Southwest.
“Many investors continue to wonder if the cycle is near its peak and whether interest rates at this level or higher, will impact pricing negatively,” said Muoio. “While the risk of a trade war still looms, overall pricing has trended upward in each month since February. As each segment has its own legitimate risks — including trade, supply and e-commerce — it’s encouraging to see the Ten-X Commercial Nowcast’s continued uptick, demonstrating that investor sentiment in real estate remains quite strong.”
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 online and only end-to-end transaction platform for commercial real estate. Since 2009, the company has sold more than $20 billion in commercial real estate. The company blends data-driven technology with industry expertise to 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.