The eggheads at the prestigious MIT Center for Real Estate (MIT/CRE) have developed 29 indexes to measure the health of the commercial real estate industry. According to their new statistical toys, the broad commercial real estate bull market has gone to pasture.
According to the sales data they crunched:
The latest index results provide solid evidence of the magnitude of the 2003—2005 commercial investment property bull market in the United States and indicate that for the broad market the “boom” period ended early this year. (2006 ed.) From a bottom in February 2002 to a plateau in February 2006, the national aggregate index rose 66 percent. Since then, the flagship monthly index has shown no cumulative gain, the longest period of no net gain since the 2001—2002 recession. The bull market was truly impressive, with no negative month from August 2003 through September 2005. (emphasis added)
While the broad market showed similarities, there were specific differences:
The quarterly property sector indexes show broad similarity but also present interesting specific differences. The fastest growing sector from the second quarter of 2002 through the third quarter of 2005 was apartments, which produced a 75 percent price appreciation during that period, driven in many markets by a condo-conversion boom that ended in 2005. But the apartment sector peaked first and since the third quarter of 2005 has declined 5 percent. The preliminary index returns for the third quarter of 2006 show both the office and industrial sectors declining for the first time. Office declined more than 2 percent, while retail continued to increase (2 percent). (emphasis added)
Maybe the office rents in our neck of the concrete jungle (NYC) will come down from the high wall.
Image (modified from original) copyright Frank Brunner
