Real Estate Values:
NY Commercial Posts Two Huge Deals
Commercial Real Estate Values In The Big Apple
Have Regained Losses And More
There's interesting news regarding commercial real estate values coming out of New York this morning. Two high-quality commercial building in the Big Apple are in escrow for a total of over $1 Billion. At $933 and $1,300 per square foot, these two sales are more good news concerning commercial real estate values in New York and, by extension, the markets in other similar cities as well … such as Los Angeles.
As we all know, when the values downturn happened a few years ago, commercial values went south with everything else. The economic downturn affected every sector of the real estate market … and everything else as well. Now, however, it can be said that in New York at least, which is a leading market and a fairly good indicator of what similar cities either are experiencing now or will shortly experience, quality commercial property has regained the losses incurred during the downturn … and then some.
Here's an article by Ilaina Jonas in Reuters with the particulars:
"Top-quality buildings have more than recovered the value they had lost in the downturn that followed the financial crisis of 2008. In April, the Green Street CPPI All-Property Index. which measures values of high-quality U.S. commercial real estate …"
What This Means To Commercial Real Estate Values
In The Near Future Is Still Difficult To Predict
So commercial real estate values have pulled up and over the levels of what they were before the downturn. At least they have in New York. Does this mean the "all clear" has sounded? No. Not really. While this is, of course, good news, analysts disagree as to where things go from here. Some believe that prices have risen too far and too fast, creating a market that is somewhat overblown. Others argue that as long as interest rates remain at historically low rates, prices will continue to rise as investors are will to take on more "cheap money" debt. So the feeling is we're either looking at a coming correction in commercial real estate values or a continued rise in prices.
Either way, if we take the long-term view, we can consider both to be good news. There is no sign that values are in a true "bubble" situation … where things could simply blow up and crash. No one expects that. A "correction" at this point simply means a slowing of the rate at which values are rising, and possibly a downturn of sorts for a period of time before real estate values begin to climb again. That's simply a healthy market balancing itself out, and not something to be feared. Whether we get a few months of correction or we don't, it appears that commercial real estate is becoming a healthier market than we've seen in a long time.
Real Estate Values.