Following a mid-September change in CREXi’s property type categorization process, land continued to climb in both asking prices and rates well into October, the company reported this week. Land properties for sale saw a 20.59% jump in average asking prices at the start of the fourth quarter, while the average asking rate for leased land jumped 21.6%.
“While we can attribute some of this growth to the addition of cross-listed property types, such as land zoned for retail development, land’s gains also point to an increase in vacant properties with potential for drive-thru, hospitality, and flex office use,” says CREXi.
Land’s outperformance relative to other property types dovetails with CREXi’s third-quarter commercial property trends report, which indicates both smaller pricing increases and, at the same time, increases rather than the decreases seen in Q2. “On CREXi, the average asking price per square foot for new listings dropped by 2.27% from Q1 to Q2. This move reflects sellers’ adjustments to uncertain market conditions caused by the pandemic,” the report states. “However, early numbers in Q3 data show a rise of 2.12% from the previous quarter.”
The relatively small drop and rise from Q1 to the beginning of Q3 is another indicator that “overall market activity, while momentarily paused, certainly wasn’t permanently impaired by current events and is building momentum towards recovery.”
Average occupancy rates of new listings in Q2 rose only 0.22% from Q1’s average. This reflects little evidence of tenants breaking their leases, and at least suggests that many of the assets added to the market in Q2 hadn’t yet had time to be affected by business closures.
“Continued slow growth into Q3 would suggest that the support granted by PPP and other small business protection programs on a state and federal level helped keep occupants’ heads afloat amid industry-dependent levels of COVID-related impact,” according to CREXi. “Indeed, most businesses strove to maintain their rent payments, and those facing difficulties (namely retail and hospitality properties) took it upon themselves to negotiate with landlords on a case-by-case basis.”
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