Fourth-quarter commercial property pricing started strong in October as investors slowly began returning to deals in response to the Federal Reserve’s efforts to cut its borrowing rates.
August, September and October have now produced the three strongest months of total sales this year as transaction momentum builds, according to CoStar Group’s monthly Commercial Repeat-Sale Indices report. The report tracks when a previously sold property trades hands again in a process called a repeat sale.
“The recent bounce in pricing may reflect lower policy rates witnessed in the third quarter of 2024 as market participants anticipated the beginning of the Federal Reserve’s easing cycle,” said Chad Littell, national director of U.S. capital markets analytics for CoStar and the report's author.
October’s repeat-sales transactions of $10.18 billion outperformed the $9.5 billion in the same month of 2023 by 7.2%.
Total sales of $88.5 billion for 2024 are running 7.6% ahead of the $82.2 billion for all of last year.
October 2024’s transactions marked the second-biggest month for repeat sales so far this year. September was the strongest.
However, the momentum may not carry into November, according to the report. Historically, it is common to see November sales volume dip — typically producing the lowest month of repeat sales in the second half of every year.
More expensive deals
The CCRSI transaction volume totals are broken down into two categories: investment grade and general commercial. The investment-grade category is based on repeat sales of higher quality and more expensive properties, while general commercial is based on the other end of the spectrum — lower quality and less expensive.
Investment-grade transactions have accounted for a high percentage of deals this year, making up 59% of the overall sales volume. Last year through the same time, investment-grade sales made up 56% of the total.
This year’s pace of investment-grade volume quickened in October by taking a 63% share of monthly repeat sales.
On the pricing front, the CCRSI report’s value-weighted U.S. composite index, which is more heavily influenced by investment-grade trades, rose for the third consecutive month in October, an increase of 1.1% over the prior month.
Meanwhile, the equal-weighted U.S. composite index, reflecting the more numerous general commercial property sales, climbed 1.3% in October from September.
October’s CCRSI is based on 1,306 repeat-sale pairs and more than 314,227 repeat sales since 1996.