Moody's Investor Service reported on the 20th that the Commercial Property Price Index rose 6.3% since April 2011. I know this report is only for May and that they must publish monthly data. And I know that they're in the "publish or perish" industry. Furthermore, I know they do a good analytical job.
My beef with them (and others like them) is that the peculiarly focused minutia they report is memed all over the web as a clarion of good or bad news. For example, with this particular report, would the data have been as optimistic if they had included March (when the government passed a bill on the 2nd to keep the government open for another 2 weeks)? In March the Obama administration was grilled about it's trade relations with South Korea, China, etc... while it sought to "level the playing field." China also attacked the dollar and Chinese inflation went global. The news wasn't much better in April, but at least the goverment wasn't at risk of "shutting down."
So what does this have to do with CRE? It matters because commercial real estate doesn't operate outside of economic conditions. To over-simplify the issue, if there are really bad CRE and economic reports in March, and better reports in April, then yes of course data will look better if studied from April.
In fact, commercial real estate news in April was delusional at best. It was at the end of March that PwC released that stupid report which said CRE was improving because investment properties were selling faster. How can a blip in investment sales mark a glorious rise in the commerical real estate market? There was that much touted "self-sustaining recovery" report by Grosvenor. Contrarily, on March 22nd, Moody's reported that CRE prices decreased 2 months in a row.
More over Moody's tracks properties around the $3 million mark and up. It is no wonder then that prices appear to have increased in May when top tier properties and segments are propelling the market. Are they really giving us the whole picture? The Moody's report perhaps should've read "U.S. Commercial Property Prices Increased for Top Tier Properties in Desirable Markets by 6.3% in May." It's not catchy but at least we'd know what they're currently not telling us.
A. Joseph Marshall
Commercial Real Estate Agent
Savannah, Ga.
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