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Commercial real estate prices diverge as hotels slide and offices rise

In June, hotel prices fell 9.3% year over year, while suburban office values rose 3.0%, and June transaction volume reached $136.6B.

Reported · Written up by our desk · Industry

Commercial real estate values are increasingly splitting by property type, breaking from prior cycles where sectors generally moved together, according to MSCI data highlighted by Bisnow. In June, hotel prices dropped 9.3% year over year, apartment values slid 1.7%, and industrial slipped 0.4%, its first negative reading this cycle.

Retail prices were essentially flat, while suburban offices gained 3% from the prior year to become the best performing sector in June. MSCI analysts said sectors are being priced based on their own fundamentals rather than as a single asset class driven by broader financial moves.

Deal activity remained active even as sector performance diverged. Transaction volume totaled $136.6B in June, up 14% year over year, and overall prices drifted upward by around 90 basis points, helped by entity-level and portfolio sales.

Portfolio sales accounted for a quarter of activity and were up 38% on the year, versus single-asset deals rising 4% to $102B. MSCI Chief Economist Jim Costello said the broader trend does not point to a collapsing market, but his models suggest the pace of deals in the second half of the year could underperform last year, with further weakness possible versus the fourth quarter of last year.

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