IPD: Renters drive U.S. commercial real estate values up 3.2% in 3Q

Commercial real estate values increased 3.2% in the third quarter, the second straight period of gains, according to the analyst firm IPD. IPD measures $80.9 billion worth of commercial properties for its quarterly property index. The third quarter growth follows a 2.1% improvement in the second quarter, meaning over the last six months, commercial real estate in the U.S. has increased 5.5%. The sharpest recovery occurred in the apartment sector, where values climbed 6.9% in the third quarter after a 4.6% growth in the previous quarter. “Returning capital to apartment sector is attracted by the favorable demographics in the multi-family housing market as home-ownership has been falling in favor of rented-occupancy,” Simon Fairchild, managing direct at IPD North America, said. Even though the average homeowner has 41 times the net worth of most renters, according to the National Association of Realtors, more renters entered the market in the second quarter than at any point in the past 15 years. Even Fannie Mae, which is loaded down with foreclosed homes, expects more renters to come. Despite the value increases over the last six months, there is still plenty of ground to make up. Between March 2008 and March 2010, values fell roughly 41% in aggregate with the steepest drop coming March 2009 when values fell 11%. Fairchild said investors are moving toward core assets where prices are sure to rise despite the struggles in the broader economy. “Capital is returning to the market and assets are beginning to trade as new lending is increasingly available,” Fairchild said. Write to Jon Prior.