Green Street Advisors is predicting that commercial property prices in the United States will increase over the next six months. The California-based research firm is ‘80 per cent certain’ that prices will hit near peak-levels last seen in 2007.
A report published by the group goes on to say mortgage backed securities are likely to cause prices of lower-quality properties to balloon, due to the availability of financing. JPMorgan Chase & Co. has raised its CMBS sales forecast to $70 billion from $45 billion in February.
Mike Kirby, the Director of Research at Green Street, said, “We’re effectively back to peak pricing. We’re fairly confident that the rebound will continue.”
The commercial property index calculation is based on the estimated value of portfolios holding high-quality properties. The Moody’s/RCA Commercial Property Price Index is sitting at 20 per cent below its November 2007 peak.
The Green Street Advisors’ report also stated that REITs are trading at moderate to net asset values. The wider spread between real estate returns and yields on investment-grade corporate bonds is considered positive, and is another indication of higher prices in the market.
The report says: “Values of high-quality (i.e., REIT-owned) properties have recovered virtually all of their lost value, while prices of lower-quality assets remain mired in the doldrums.
“A recent renaissance in the CMBS market – issuance is back to ’04 levels – bodes well for a narrowing of the gap.”
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