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Commercial property prices in cities around the world have increased overall since the pandemic began, but the picture is less rosy for London and many of the US’s central business districts, according to a report by Real Capital Analytics in the third quarter.
Demand for industrial and logistics real estate helped push commercial property prices in major cities around the world, particularly Melbourne and Los Angeles, 7.3% year-over-year in the third quarter, according to the monthly RCA CPPI Composite Index, the Maps offices, retail and industrial and is transaction-based to reflect repeat sales.
But in the City of London and major business districts in Chicago, New York City and San Francisco, the COVID-19 crisis remains a struggle nearly two years after the COVID-19 crisis began, especially when comparing property prices with the larger metropolitan areas (see grafic) ).
For real estate investors, London doesn’t call.
Real Capital Analytics
The graph shows that in seven out of 17 markets analyzed by RCA, price levels in central business districts were lower than before the pandemic.
Read: New York City office buildings have lost 17% of their value in the pandemic
And in five regions where prices have risen, they still lagged gains in larger metropolitan areas, in part due to continued remote working in suburbs and the higher concentration of retail and office real estate in big cities.
The opposite setup was a blessing for Germany, where “instead of a single focus, the core markets for office investments are themselves decentralized and distributed across prime cities,†according to the RCA report.
The changing fortunes of big cities come despite a rebound in US stocks SPX,
and booming corporate earnings, but also because funding conditions remain easy to borrow due to low global interest rates. While the US bond market was closed for Veterans Day on Thursday, the benchmark’s 10-year Treasury yield TMUBMUSD10Y,
was last seen near 1.56%.
The other thing to consider is that London and other markets, which have seen negative price growth since late 2019, were “some of the most expensive office markets in the world by cost of use,” prior to the start of the pandemic, the report said.
See: Shorter leases? Top real estate managers Durst and Jones talk about the future of the office
