U.S. commercial real estate prices posted the largest gain this
decade in the first quarter, as prices were up for all major
property types, said the National Real Estate Index.
Claiming the commercial real estate market "is back," the
research firm said its composite price index increased 1.8 percent
in the quarter. That comes on the heels of a 1.1 percent gain in
the previous quarter and marks the fourth consecutive quarter the
index has risen, gaining 3.0 percent for the 12 months ended March
Price gains continue to be chalked up mainly in the
economically strong Sunbelt states, led by a surge in apartment
property values, and in the Western states outside of California,
National Real Estate said in its quarterly study.
"Although apartments are clearly the pacesetter, perhaps the
most encouraging development in the first quarter is that
statistically significant gains are also now occurring in other
property sectors," said Daniel O'Connor, National Real Estate's
Even with the gains, the price index, which consists of
commercial business district, warehouse, retail and apartment
properties, is only about 91 percent of its mid-1987 level.
National Real Estate Index of Emeryville, Calif., is a
transaction-based data service that reports property price and rent
trends in 55 markets every quarter.
Once again, the research firm's apartment index was the biggest
gainer, posting a 3.0 percent rise in the quarter. For the 12-month
period, the apartment index rose 7.2 percent.
"Some local markets are experiencing truly outstanding gains,"
said O'Connor. "For instance, the Southeast and Southwest regions
of the U.S. saw apartment prices jump an average of 7 percent in
the first quarter."
Rents averaged $9.86 a square foot in the first quarter, up
from $9.82 in the previous quarter, said National Real Estate,
calling the rise insignificant. A year ago, rents averaged $9.59 a
The jump in apartment prices has spawned a flood of new
construction, which in the first quarter was up by about a third to
38,000 units from a year earlier, the firm said. At least a few
Southern markets have sufficient units in the pipeline to become
oversupplied within the next 12 months, it said.
Nevertheless, apartment investors have added to their holdings
in 1993. The top 10 owners of U.S. apartment complexes, sensing
prices had hit bottom, increased their holdings in 1993 by 14
percent, up from an increase of 3.6 percent in 1992, according to
the National Multifamily Housing Council. …