Moody’s: CRE prices up 6.3% in May to highest level in six months

Moody’s Investors Service said its index for commercial real estate prices rose 6.3% in May, marking the first increase in six months and the largest monthly gain since the agency began tracking the data in 2000. The index is 45.7% lower than the peak in October 2007, and April’s reading was the lowest since the peak. (Click on chart to expand.) Analysts attributed the increase in the Moody’s/REAL Commercial Property Price Index to higher prices on distressed transactions, which rose 4.8% during May. The index is based on repeat sales of properties across the country using market data from Real Estate Analytics LLC. Distressed sales accounted for 27% of all repeat-sales during the month, although that percentage has decreased the past two months, according to Moody’s. “They switched from being a drag on aggregate prices to contributing to their increase,” analysts said. Significant returns from assets bought and sold after the real estate downturn also helped prices in May. “A number of transactions that were recorded in May had their most recent prior sales in 2009, as the market was beginning to bottom and subsequently traded for substantial returns,” said Tad Philipp, Moody’s director of CRE research. “We are likely to see a pickup in post-peak, repeat sales and expect such transactions to play an important role in helping drive the CPPI higher.” May’s count of repeat transactions remained essentially flat with the prior month at 174, however, dollar volume rose 33.8% to $3.3 billion in May, one of the largest non-year-end levels since the peak, according to Moody’s. Write to Jason Philyaw.