Commercial property’s rebound complete?

Bubble Watch digs into trends that may indicate economic and/or housing market troubles ahead. Buzz: Commercial property’s pandemic era rebound looks relatively complete by one yardstick.

The trend

It wasn’t very long ago that things looked bleak for many landlords, both those who serve corporations and those who house consumers. The pandemic’s economic chill made it tough for many businesses and millions of tenants to write a rent check.

Well, things have changed for the overall industry as the economy — and our collective health — recover. A price rally in July pushed Green Street’s all-property index up 2.4%. That upswing moved this benchmark to its first record high of the pandemic era at 1% above its pre-coronavirus level of February 2020.

Yes, it’s an eye-catching rebound from a nasty 11% fall from February to July 2020 as the pandemic iced the economy. However, this is in no way a universal recovery for trusts that own and operate large properties.

Of 11 real estate sectors tracked by Green Street in its monthly pricing report, six in July were above pre-pandemic values, one is even and four are still below February 2020 pricing.

Quiz: How much is the stock market’s Standard & Poor’s 500 index up in the same period? (Answer below.)

The dissection

Last summer, a commercial real estate industry collapse was feared. This year, we wonder if some of the rebound seems too good to be true.

The storylines behind commercial property’s mixed performance mirror the uneven rebound of the broader economy. Note that ultra-low interest rates motivating house hunters to buy also are jazzing bigmoney investors to do the same with commercial properties.

Let’s look at price swings in the commercial real estate niche over 17 months, starting with the winners …

MANUFACTURED HOME PARKS >> Shook off a 4% early loss and were 25% above pre-pandemic levels in July. Homeownership became surprisingly hot, and this is perhaps the most affordable option. That also rewarded the landlords who own the land underneath mobile homes.