MSCI: activity falls, but CRE prices decline at slower rate

Investment activity in commercial real estate continues to decline in a majority of markets, but the pace of price declines has slowed significantly especially in Europe and North America, according to the latest MSCI data.


The RCA CPPI (commercial property price indexes), that are transaction-based to measure prices accurately, show that – despite the 52% dip in investment volumes – year-on-year global CRE prices have not been falling so fast in recent months.

The Global Cities Composite Index fell by 0.4% in Q3 2023, which was a significant improvement over the decline in the second quarter. Year on year, the index fell by 4.5%. For the moment at least, MSCI said, the fall in commercial property prices appears to be decelerating.

The slowdown in price declines was consistent across both North America and Europe. Conversely, in Asia Pacific where prices began falling much later, the regional composite was the only one of the three regions where the decline gathered pace in the third quarter.

Asia Pacific was largely dragged down by Hong Kong, which posted the worst quarterly decline of the global cities, at 3.8%. Other Asia Pacific metropolitan areas had largely resisted price declines up until the start of this year. The deteriorating outlook in 2023 meant that prices finally began to fall in Seoul, Singapore, Sydney and Tokyo at the beginning of this year.

On the other hand, prices had already begun falling for most of North America and Europe by the end of 2022. Many of these global cities that bit the bullet earlier are also stabilizing earlier, the research shows.

Across the German A cities, where prices had plummeted 18.9% from the peak, quarterly price growth was flat in the third quarter. Against the backdrop of declines, two global cities stood out, albeit for different reasons.

Commercial pricing in Paris resisted the huge increases seen across many of the other global cities back in 2021, and has continued to trend sideways. Toronto, on the other hand, remained the only global city where prices continued to soar, thanks to the outperformance of the industrial sector.