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Interest Rate Increases Lead to Commercial Property Price Declines
The Green Street Commercial Property Price Index decreased by 7% in October. The Newport Beach, CA-based market intelligence firm said rising interest rates have caused property prices to decline by 8% over the past 12 months and by 13% from their recent peak.
“It’s a simple story: higher yields on Treasury bonds equals higher cap rates,” said Peter Rothemund, co-head of strategic research at Green Street. “And as large as the decline in pricing has been, I don’t think we’re out of the woods. If the 10-year note stays above 4%, property prices are likely to keep falling.”
By property type, apartments experienced the biggest 12-month decline in pricing at 14%, while mall pricing has seen the biggest drop from its recent peak and is down 23%. All property sectors saw declines in October from the previous month, with the exception of net lease, which was unchanged.
Pictured: Green Street headquarters.
- ◦Sale/Acquisition
