May 17, 2018
Any doubt that pricing for global commercial real estate may be tapering off was removed in Real Capital Analytics’ (RCA) latest CPPI Global Cities report. Growth slowed at the start of 2018, with the composite showing an increase of 1.6% in Q1 2018 from a quarter earlier, and an 8.4% bump from a year ago.
RCA notes a number of key markets posted flat-to-modest quarterly declines in prices. Los Angeles, San Francisco, London and Melbourne all registered price drops for Q1 2018. There was only a single market among the 18 that contribute to RCA’s Global Cities Composite which displayed an annual drop in prices.
Elizabeth Szep, a researcher at RCA, says, “Though a quarter does not represent a trend, the quarterly slowing in some markets may indicate that investors are taking a moment to regroup after several years of sustained price growth in real estate markets worldwide. In most cases, the markets posting price declines for the quarter are those which have grown the most over the past five years.”
She points out that Los Angeles, San Francisco, London and Melbourne all experienced above-average growth over the past five years. Within New York, the Manhattan market posted a quarterly decline, as did the central area of Sydney. In these two cases, growth for the overall market has remained positive despite the city center declines, notes Szep.
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