According to the latest Trepp Property Price Index, commercial property prices experienced a 5.3% decline last year. This decrease was accompanied by an increase in properties being sold at a loss. The third quarter of 2023 saw a drop of 0.82%, bringing prices down by 7% from their peak in Q1 of 2022 and back to levels similar to those seen in Q3 of the previous year during the post-lockdown surge.
Trepp has observed that while pricing declines have slowed, there are some promising signs as markets show fewer properties being sold for losses. However, overall data shows that during Q4 of 2023, approximately one-quarter (26.4%) of paired sales involving office properties resulted in losses compared to only about one-fifth (21.8%) during the same period in Q4of2019.
Similarly, retail property sales also saw an increase with around one-fourth (27%) resulting in losses compared to just over one-fifth (21.%5) at the end of last year and nearly two-thirds more than what was recorded three months prior when only about two-tenths were experiencing such difficulties.
In contrast, industrial property sales fared better with only around on-eighth(12.) experiencing any kind offinanciallosseswhile multifamilypropertieswere slightly higherataroundone-sixth(19.). Although both sectors did experience increases from previous periods,the numbers remain relatively lowcomparedtotheofficeandretailsectorswhichsawmorethan doublethepercentageofsalesresultinginlosses.These findings were reportedbyTreppwhoalso notedthattheslowingdeclinesmay be attributedto indicationsfromtheFederalReserveindicatingpossiblechangesinthefederal funds rate which could potentially leadtodecreasesinsteadofincreasesaspreviouslyanticipated.This is good news for investors who may see improved performance and profitability going forward.
