Commercial Real Estate Posts Historic Appreciation

by Bob Howard, from GlobeSt

Name your property type and it is most likely rising in value faster than it ever has before or close to an all-time high, according to a new report from Global Real Analytics, publisher of the National Real Estate Index. Most property sectors achieved annual price increases in 2005 that have not been seen “since the beginning of this bull market in the 1990s," says Dick Wollack, CEO of Global Real Analytics, in commenting on the report.

Wollack cites a “year-end flurry of property transactions” that helped push most property sectors into double-digit annual price increases. But prices were already climbing, so the action late in the year only further propelled values that were already accelerating.

Prices for class A apartments led the property types with an appreciation of 12.8% at the end of 2005, followed closely by CBD office values at 11.8%. Other rates of appreciation ranged from 11.6% for retail assets to 7.6% for suburban office.

“The last time the National Real Estate Index reported anything close to the current appreciation rates was for the year 1998 when CBD office prices shot up 15% and class A apartment prices jumped 10%,” the GRA report declares. Still, that year did not produce the same gains across all sectors as in 2005.

In addition to different rates of appreciation by property type, the report shows regional differences that in some cases vary dramatically from the national averages. Global Real Analytics titles this section of its report “Florida and the West the Best.”

It points out that the Pacific/Southwest and Florida/Gulf regions produced the highest annual average appreciation across all property types, 13% and 12% respectively. That contrasted with an East Central Region average appreciation figure of 5%, lowest in the country.

In view of the soaring prices, Wollack comments that “looking forward to 2006 it would be bold to again predict the same level of increases.” But then, it would have been bold to predict the increases seen in 2005, he says.