From the Wall Street Journal:
By A.D. Pruitt
It wasn’t more than two years ago that commercial real estate began a brutal downhill slide with no apparent end in sight, as investors and developers braced for an avalanche of mortgage defaults and foreclosures.
But, in another sign the dog days maybe coming to an end, property values have risen nearly 30% since the industry lows in 2009, according to an index by Green Street Advisors, a firm based in Newport Beach, Calif., specializing in research of real estate investment trusts.
According to the Green Street Advisors Commercial Property Price Index, almost half of the decline that occurred from the brutal industry downturn between 2007 and 2009 has evaporated, but values remain roughly 20% shy of their peak. Meanwhile, the index, comprised of $300 billion worth of commercial properties and assets owned by 53 REITs, rose 3% in September.
Expectations that commercial property values are on the mend and will see a robust recovery next year have fueled sharp gains in real estate stocks that have consistently beat the broader stock indexes like the Dow Jones Industrial Average and S&P 500 since last year.
“The rebound in pricing that began in earnest about a year ago has been impressive in terms of both its vigor and durability. Sellers are feeling less pressure to act, the outlook for fundamentals has improved, well-capitalized buyers are plentiful, and financing markets are recovering,” said Mike Kirby, Green Street’s Director of Research.