S&P Index Shows Stability in Commercial Real Estate

The chairman of the Standard & Poor’s Index Committee said the release of January results for the S&P/GRA Commercial Real Estate Indices shows that commercial real estate is holding stead for the time being despite the tanking of the residential real estate world. “Will commercial real estate follow residential down or will it hold together? At this point, overall, it seems to be hanging together for the moment,” David Blitzer, chairman of the Index Committee of Standard & Poor’s, told CPN. “If you look month to month, there are pockets of strength and pockets of weakness. Commercial real estate is not as robust as it was six to 12 months ago, but it hasn’t dropped into the kind of downward collapse that residential stuff has.” Highlights from the report include the national composite annual price appreciation of 7 percent versus January of 2007; and the northeast had the highest return over the month of 1.4 percent and has the highest annual return over the past 12 months of 9.4. In the property sector, warehouses reported the biggest gain for the one-month period with 1.9 percent increase and 12-month of 10.1 percent periods. Office reported the only monthly decline of .2 percent, but has still returned 9.9 percent over the past 12 months. Apartments and retail reported annual gains of 5.8 percent and 4.3 percent, respectively, according to the report. The indices measure the change in commercial real estate prices by property sector and geographic region in the United States. The S&P/GRA Commercial Real Estate Indices make up 10 commercial real estate indices: a national composite, five geographic regions, and four national property sectors. “Among other things, apartments–which obviously are the closest thing to residential real estate–are hanging on for the time being. Prices aren’t rising as rapidly as before when buying apartment buildings,” Blitzer said. “For the moment, commercial real estate is somewhat contained. The risk is that should the entire economy weaken, commercial real estate will feel the impact.” Slower retail sales will eventually hit the prices of retail space, Blitzer said. There have been some questions about office space in cities like New York, which is dominated by financial services, he added. “I don’t know if I’d call (the report results) a bright spot, but it is not a black spot,” he added. “I don’t think it will trigger growth because nothing says hurry and invest … In the short term, there is some stability. If they’re thinking of panicking, this is not a good reason.”