U.S. Commercial Property Prices Rise Above Their ’07 Peak

by 06 May 2013

(Bloomberg) - Prices for U.S. commercial property last month rose above a peak reached in 2007 as low interest rates and financing availability helped increase values, according to research firm Green Street Advisors Inc.

The Green Street all-property index climbed 1 percent from the previous month and is 1 percent higher than the previous record, from August 2007, the Newport Beach, California-based company said today in a statement. Green Street’s index is based on its estimate of the value of portfolios of real estate investment trusts, which tend to own high-quality properties.

“It’s likely we’ll see more gains,” Peter Rothemund, an analyst at Green Street, said in the statement. “Real estate continues to be attractively priced relative to the returns on offer in the bond market.”

Low borrowing costs, an increase in lending and a recovering economy are helping boost demand for commercial real estate, Green Street said. Investors are buying office, apartment and industrial buildings along with malls and strip retail centers because returns are higher than for other investments, such as government bonds.

Another measure of real estate values, the Moody’s/Real Capital Analytics Commercial Property Price Index, was 20 percent below a 2007 peak in February, the latest month for which figures are available, according to an April 9 statement. The measure is based on repeat-sale transactions that occur in the one-month period two calendar months prior to the report.

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