* U.S. commercial real estate prices rise 4 pct in Q3
* Sales rise in Q3
By Ilaina Jonas
NEW YORK, Nov 3 The prices of investment-grade
commercial real estate rose more than 4 percent in the third
quarter, possibly signaling an end to the sector's year-long
downward spiral, according to an leading property index
released on Tuesday.
The 4.4 percent third-quarter increase in the MIT Center
for Real Estate's transaction-based index (TBI) index is the
first positive price change in the index in more than a year
and the largest increase since the market downturn began in
"One quarter does not a trend make and we are still well
below normal trading volume," David Geltner, director of
research at MIT/CRE, said in a statement. "Nevertheless, this
is the strongest sign of a bottom that we've had in two
The U.S. commercial real estate market has been in a
downward spiral for more than two years. Borrowers are facing
shortfalls in financings when loans come due. Some borrowers
are struggling to meet even monthly payments.
The delinquency rate of U.S. commercial real estate loans
securitized into Commercial Mortgage-Backed Securities (CMBS)
hit 4.8 percent in October, up from 4.36 the prior month and
dwarfing the 0.77 rate of a year earlier, according to Trepp,
which tracks CMBS loans.
The TBI tracks the prices that institutional investors,
such as pension funds pay or receive when buying or selling
commercial properties such as shopping centers, apartment
complexes and office towers.
The price index at the third quarter stood at 36.5 percent
below its 2007 peak, up from its 39 percent deficit seen last
quarter, which now could be the trough and suggests the U.S.
commercial property market may have finally found a price
In addition, the number of transactions rose for the second
straight month in the third quarter to 90 from 42 in the second
"The big news this quarter is not just that the price index
increased, but that transaction volume substantially increased
for the second quarter in a row, reflecting the first increase
in market sentiment in two years," Geltner said.
MIT/CRE also compiles indexes that gauge movements on the
demand side and on the supply side of the institutional
property market. The demand-side index -- which tracks the
changes in prices that potential buyers are willing to pay --
rose to 42 percent below the 2007 peak, up from 48 percent last
quarter. It ended eight consecutive declines.
The 12 percent jump was the first increase in the demand
index after eight consecutive quarters of decline.
"The demand index can be considered a gauge of market
sentiment, at least among the all-important buy-side of the
market," Geltner said.
The supply-side index -- which gauges the prices property
owners are willing to accept -- continued to fall in the third
quarter. It was down by 2.5 percent, to 30 percent below its
"The combination of the upsurge in demand and the continued
drop in sellers' prices led to the strong increase in
transaction volume and the beginnings of a reliquification of
the market," MIT/CRE Research Technician Holly Horrigan said in
(Reporting by Ilaina Jonas; editing by Andre Grenon)