For the first time in four months, Moody’s Investors Service has reported a decline in commercial real estate prices, which had appeared to be stabilizing toward the end of 2009. Compared to a year ago, commercial real estate values are down 26 percent.
This is disappointing for many investors and analysts, who had predicted that commercial property values would stabilize, but not surprising to Moody’s. The service had predicted that “we did not feel that these increases [from November 2009 to January 2010] were sustainable in the short term, particularly given current low transaction volumes.”
However, Moody’s did report that interest in high-quality properties appears to be picking up, though the actual transaction activity in the commercial market remains “muted.” Distressed sales in Moody’s repeat-sales database has also increased from 4 percent of resales in 2008 to 32 percent in February 2010.
Moody’s predicts that the market will keep bouncing, with no clear trends established until volume picks up and “market-clearing prices are established for distressed properties.” I definitely know where I would want to be when those “market-clearing prices” are established: right in the thick of it helping stabilize the market and buying commercial properties at previously-unheard of prices. Now is the time to get involved in commercial real estate, because even the experts are predicting bargain-bin prices and relying on those prices to right the market once more.