In real estate, a price index measures the changes in property prices over the course of time. That means a commercial real estate (CRE) price index gives a sense of how strong the market is in your region. But just like watching the weather, every source will give you a slightly different forecast. Yes, there are different CRE price indexes that investors, owners, and realtors can draw from–and each uses different CRE data. Canyon Data is here to explain how to use a CRE price index and where to go for additional information about your local market when you need more insight.
Commercial Property Price Index Options Explained
Here are some of the most well-known CRE price indexes and insight into where each sources its CRE data for analysis.
- SIOR Commercial Real Estate Index™ (CREI): This CRE price index is maintained by the Society of Office and Industrial Realtors (SIOR). The rating of the market is on a scale of 0-200, with 200 representing incredibly high prices and 0 representing low prices. The CREI is updated every quarter based on surveys of market experts. Bear in mind, this index will only cover office and industrial properties, not multifamily or retail.
- Co-Star Commercial Repeat-Sales Indices™ (CCRSI): The CCRSI is based on transactional data. When a property is re-sold, Co-Star’s index compares the current sale price with the previous one to measure how much the value has gone up. National-level changes are reported monthly, while regional reports or indexes by property type are shared quarterly. Since this index only includes properties which have been sold, new properties and those which owners keep in their portfolio could still be impacting your local market without being represented in the index.
- Green Street Commercial Property Price Index™ (CPPI):The Green Street CPPI is appraisal-based, while also capturing the prices at which commercial properties are being negotiated and contracted. This grants insight into how the outcomes of a transaction may differ within the market. For instance, if a property appraises at a certain value but sells for more, that would be reflected in the CPPI. This index focuses on high-value properties, meaning those in more suburban or rural areas may not be represented in the numbers.
- Real Capital Analytics Commercial Property Price Indices™ (RCA CPPI): The RCA CPPI is a global aggregate of CRE data sources, allowing users to compare global, national, and regional data about markets and submarkets. With over 20 years of CRE data from the US, Europe, and Australia, this commercial real estate index by country is popular with international CRE investors. However, if the investors, lenders, and owners do not contribute their data to the database, the insights may be incomplete or out of date.
These US commercial real estate price indexes let investors and owners know what numbers they can expect in a transaction. But is this a good time to buy or sell commercial property?
Is Commercial Real Estate a Good Investment in 2022?
One of the biggest financial predictions for 2022 is the recovery of the commercial real estate industry from the economic impact of the pandemic. Industrial real estate in particular is expected to lead this recovery, along with hospitality as people are able to get back to traveling. Multifamily and mixed-use properties are also good investments, with apartment rents projected to increase by 10% in the next two years. The one CRE sector which is lagging in growth is office space. With employers struggling to hire and retain employees, and those who are on the team working from home, the future of the office is still uncertain.
Go Beyond the CRE Price Index Forecast With a Canyon Data Subscription
Each of the CRE price indexes we described can give you a general idea of whether it’s a good time to invest in commercial real estate and what sectors hold the most potential. But we also described some of the limits of these indices. Whether it’s incomplete data, or only drawing data from certain sectors of the economy, at the end of the day these options can lack the deep, granular insight you need to make decisions in your neighborhoods.
Canyon Data is an alternative, supplemental CRE data source which was custom-built to fill in these gaps. As seasoned CRE professionals, Canyon Data’s founders know exactly the type of insights and user experience that CRE decision makers need to get the job done. We appreciate that at its core, all real estate is local, and you need local data to build a legacy that lasts. That’s why we created our proprietary data collection and verification process to track the market block-by-block and property-by-property. This means an opportunity to make informed investments, better appraisals, and more competitive listings based on local data, while also staying aware of national trends through the bigger CRE price indexes.
We have launched our data set for the Boise, Idaho, market with plans to expand soon into Portland, Salt Lake City, and Seattle. We invite you to subscribe to our platform and see the difference that emerges when you have real, accurate data you can trust. Get your subscription today!