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Commercial Real Estate Values Continue to Fall

By Ken Holman

Overland Group, Inc.

 

Commercial real estate values continue to fall, but the rate of decline decreases.

Integra Realty Resources' first quarter 2010 Commercial Property Index indicated the office, industrial and retail sectors experienced a two percent drop in value during the last three months, which was well below the seven to 15 percent value declines over the last twelve months.

The lodging sector experienced a four percent drop in value, while the multifamily sector is currently the most stable real estate sector with a rate of decline at only one percent in the past three months, performing above expectations.

The first quarter survey, which was conducted in April, showed similar results to the 2009 fourth quarter survey. Lodging and retail experienced the greatest declines in value with the Western region of the United States continuing to be hit the hardest.

Jeffery Rogers, President and Chief Operating Officer of Integra Realty Resources, claims, "We are seeing clear signs that key sectors of the real estate industry is in recovery mode, however, at this point, the recovery is limited to reducing the rate of decline in commercial real estate valuations. Overall, well-leased retail, office and industrial properties have shown improvement, although stabilization for these property types is not yet in sight. With travel up, the lodging sector is beginning to improve, but the risks of the global economy will keep this sector in the risk column for a while."

Distressed assets, on the other hand, are significantly less than the percentage shown in Integra's fourth quarter 2009 survey. The Southern and Western regions seem to be struggling the most, while the Eastern and Central regions are performing slightly better.

Arthur P. Pasquarella, Chief Operating Officer of BPG Properties Ltd., believes, "Business confidence is being buoyed by strong earnings which...lead to improving employment conditions and...an increase in spatial demand. Real estate investors are increasingly optimistic about future property earnings and have begun to return to the market with the results being both a more robust bidding environment and increased pricing in select core markets."