Green Street

Commercial Property Price Index®

Pan-European Commercial Property Price Index

April 7, 2022

A New (Nominal) High

London, 7 April 2022 - The Green Street Commercial Property Price Index increased by 1.5% during the first quarter of 2022. The index, which measures pricing of a broad swathe of Pan-European commercial properties, notched another new high. Industrial demand remains unabated with asset values increasing over 3% in the most recent quarter. Retail experienced modest yield compression lifting values ~2%. Income growth pushed residential values ~1% higher. Uncertainty in the office sector remains as asset values are largely unchanged.

“Commercial real estate asset values notched higher on a nominal basis in the first quarter of this year,” said Peter Papadakos, Managing Director at Green Street. “Elevated inflation expectations, dearer debt costs, and the fallout from the war in Eastern Europe are top of mind for commercial real estate investors. Property return premiums over fixed income yields, well above their long-term average at the start of 2022, are now slightly below their long-term average. At the sector level, industrial is relatively best positioned with low starting vacancy rates and a backlog of tenant demand. Income growth in the residential sector remains resilient, but rising debt costs are eroding away prospective levered returns in a sector with pre-capex initial yields hovering near 3.0%. The current macro backdrop warrants caution in underwriting assumptions; based on our numbers, commercial real estate pricing in Europe now tilts towards the expensive side of a fair range.”

Take a look at our U.S. Commercial Property Price Index

How is our index different than others that track commercial property prices?

How is our index different than others that track commercial property prices?

Timeliness

Green Street's Commercial Property Price Index® is a time series of unleveraged U.S. commercial property values that captures the prices at which commercial real estate transactions are currently being negotiated and contracted. Features that differentiate this index are its timeliness, its emphasis on high-quality properties, and its ability to capture changes in the aggregate value of the commercial property sector. Learn more.

Green Street's Commercial Property Price Index is a time series of unleveraged Pan-European commercial property values that captures the prices at which commercial real estate transactions are currently being negotiated and contracted. Features that differentiate this index are its timeliness, its emphasis on average institutional quality properties, and its ability to capture changes in the aggregate value of the commercial property sector.

Green Street Commercial Property Price Index®

Green Street Commercial Property Price Index

Indexed to 100 in August 2007

Indexed to 100 in September 2007

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Core Sector Average is equally-weighted between the Industrial, Office, Residential, and Retail sectors.

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Change in Commercial Property Values

Amount property values have increased over this period

7 April 2022



What makes our Commercial Property Price Index® unique?

There are significant differences between the Green Street CPPI® and other indices that track commercial property prices. Green Street's CPPI® is appraisal-based. Appraisal-based indices are only as good as the valuation estimates used to construct them, and Green Street has long devoted sizable resources to deriving accurate estimates of the values of the properties owned by REITs. Most other indices are transaction-based.

Green Street's Pan-European Real Estate Analytics platform covers 25 of the most liquid European real estate markets across the industrial, office, retail, and residential property sectors. The Commercial Property Price Index is a time series of unleveraged property values across these sectors and markets, and captures the prices at which commercial real estate transactions are currently being negotiated and contracted. Features that differentiate this index are its timeliness, its emphasis on average institutional quality properties, and its ability to capture changes in the aggregate value of the commercial property sector.

Institutional Quality

Institutional Quality

Average Institutional Quality

The index is based on Green Street's frequently updated estimates of price appreciation of the property portfolios owned by the REITs in its U.S. coverage universe. Since REITs own high-quality properties, the index measures the value of institutional-quality commercial real estate.

The index is based on Green Street's frequently updated estimates of price for the property portfolios of a typical commercial real estate investor. It is driven by the fundamental models maintained by the research team, which, in turn, are driven primarily by changes in market cap rates and net rental income.

Timely

Timely

Timeliness

Our index reflects changes in commercial property values as soon as we hear about them. That's one of the benefits of an appraisal-based index; we don't have to wait for deals to close. Most other indices are based on closed transactions, so they convey information several months old.

The Green Street index value is based on where commercial real estate would transact today. Other indexes, based on either closed transactions or formal appraisals, may reflect market prices from many months earlier.

Value-Weighted

Value-Weighted

Asset Value Weighted

We place more weight on high-quality properties, e.g. a New York skyscraper has a much greater impact than a suburban strip mall. Because our CPPI® is value-weighted, it measures what’s happening to real estate prices in aggregate, similar to the Wilshire 5000 that measures what’s happening to the stock market in aggregate. Most property indices are equally-weighted.

Each sector index is created by GDP weighting individual market indexes. The sector indexes are then equal weighted to create the Pan-European Commercial Property Index. Akin to familiar stock price indexes (e.g., S&P 500), GDP value weighting provides a gauge of aggregate (as opposed to average) values. Equal-weighted indexes, by contrast, put the same emphasis on a Dusseldorf industrial building as they do a trophy London office building.