According to Moody’s Investors Service, commercial real estate property prices are once again on the decline, sending the market “dangerously close to double dip territory”[1]. The service’s REAL Commercial Property Price Index (CPPI) showed that prices fell 3.3 percent on a national level in February, down 4.9 percent from a year prior. This is just 0.8 percent away from the market’s “post-peak low” set in August of 2010.
Just a few days ago, analysts were excitedly discussing the market’s recovery, saying that while it had certainly not been speedy, that it was proceeding ahead of forecast. The ambiguity may be caused in part by what Tad Phillip, the director of commercial real estate research at Moody’s, says are “large, monthly price swings” in the “bottoming process” of the market[2]. Phillip credits “fewer repeat sales, a high percentage of which are considered distressed,” with the extension of the bottoming process.
As with residential real estate, the commercial real estate market seems to be growing in regional specificity, with national averages failing to provide true insight into the actual state of the market. Do you still rely on national numbers in your real estate investing decisions?
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[1] http://www.dsnews.com/articles/moodys-commercial-real-estate-prices-just-08-above-cycle-low-2011-04-20
[2] http://www.structuredcreditinvestor.com/story.asp?PubID=250&ISS=22514&SID=30507&article=Third%20consecutive%20decline%20for%20CPPI
This just goes to show that traditional market analysis systems do not work. Since the dawn of time we have been “chasing” the market. Reacting to what has already happened in “hopes” of guessing right as to what’s going to happen.
If anyone relys purely on “national” statistics to make investing decisions they may as well post map of the US on a dart board to decide where they will buy their next property. These stats have absolutely Zero to do with ANY given market.
If you’re not analyzing the “Local” market, you’re relying on nothing more than Luck.
Did you know that while the nation was crashing toward the bottom in 07-08-09 that New Orleans property was appreciating in value. National stat didn’t tell you that. While markets were crashing all around there was money to be made in New Orleans.