Commercial Real Estate Prices Falling

CoStar released their commercial real estate price index for the month of November this weekend.  The composite index fell 2.57% month over month, and the ever popular investment grade index (the trophy properties) fell 4.07% month over month.

I have churned through countless outlooks from professional companies involved with the commercial real estate market and their forecasts are extremely optimistic across the board.

If they do not feel the bottom is already in place, then they see it occurring in the first half of 2011.

These outlooks factor in job growth, high consumer spending, and a lowering of interest rates.  Basically they see a strong recovery across the board.

With excess inventory, short term under water loans maturing, extremely low interest and cap rates, tremendous pressure from online retailers, and consumers on life support, I see bloodshed ahead for the commercial property market. Look for the graph below to continue its straight line downward. (Red line is composite pricing)

There will be a time to purchase commercial real estate, but that time is not now.