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Commercial real-estate prices in cities around the world have climbed overall since the start of the pandemic, but it is a less rosy picture for London and many U.S. central business districts, according to a third-quarter Real Capital Analytics report.
Demand for industrial and logistics-related properties helped lift commercial real-estate prices 7.3% across major world cities, particularly in Melbourne and Los Angeles, in the third quarter from a year ago, according to the monthly RCA CPPI composite index, which tracks office, retail and industrial and is transaction-based to reflect repeat sales.
But in the City of London and key business districts in Chicago, New York City and San Francisco, it continues to be a struggle nearly two years into the COVID-19 crisis, especially when comparing property prices with their broader metro areas, (see chart).
For property investors, London isn’t calling.
Real Capital Analytics
The chart shows that in seven of 17 markets analyzed by RCA, pricing levels in central business districts were lower than before the pandemic.
Read: New York City’s office buildings lost 17% of their value in the pandemic
And in five regions where prices punched higher, they still lagged gains in broader metropolitan areas, in part due to ongoing remote work in suburbs and higher concentrations of retail and office properties in big-city centers.
The opposite setup has been a boon for Germany, where “instead of a single focal point, its core office investment markets are themselves decentralized, spread out across top-tier cities,” according to the RCA report.
The shifting fortunes of big-city buildings comes despite a rebound in U.S. stocks
SPX,
and booming corporate profits, but also as financial conditions continue to be easy for borrowing via low global rates. While the U.S. bond market was closed for Veterans Day on Thursday, the benchmark 10-year Treasury yield
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was last spotted near 1.56%.
The other thing to consider is that London and other markets experiencing negative price growth since late 2019 were “some of the most expensive office markets in the world by occupancy costs,” before the pandemic began, the report said.
See: Shorter leases? Top real-estate executives Durst and Jones talk about the future of the office
