According to the Co-Star Group, the commercial real estate market is doing extremely well. As the chart above shows, a value-weighted measure of commercial property price indices has risen at a 10% annualized pace for the five years ended September 2014, and prices now exceed their pre-recession high. An equal-weighted measure is up over 14% in the past year.
Here are some of the headlines:
COMMERCIAL REAL ESTATE PRICE SURGE CONTINUES IN THIRD QUARTER
Both the value-weighted and the equal-weighted U.S. Composite Indices of the CCRSI made strong gains in September 2014 to close the quarter. The value-weighted index, which is heavily influenced by core transactions, advanced by 1.9% in the month of September and 3.3% in the third quarter of 2014. The value-weighted index is now 2.8% above its prerecession high and continues to make solid gains. The equal-weighted U.S. Composite Index, which is heavily influenced by smaller non-core deals, increased by 1.3% in September and 4.2% in the third quarter of 2014.
PROPERTY SALES ACTIVITY EXPANDING QUICKLY.
ANNUAL PRICE GAINS REALIZED ACROSS ALL MAJOR PROPERTY SECTORS.
RETAIL PROPERTY SEES STRONGEST ANNUAL GAIN.
MULTIFAMILY INDEX PASSES PREVIOUS PEAK.
We may be in a sluggish recovery, but that does not mean that everything is sluggish. I note that since September 2009, the total return of the Vanguard REIT (VNQ) is an annualized 18.7%, almost two percentage points per year better than the annualized 16.8% total return of the S&P 500 index.