U.S. commercial real estate prices increased in July, ending a five-month decline and signaling renewed interest from large-scale investors after a prolonged slump. The market, weighed down for over two years by high borrowing costs, is beginning to show signs of renewed activity, particularly among institutional buyers, according to CoStar.
Following a wave of interest rate hikes in 2022 and 2023 by the Federal Reserve, commercial property values had fallen steadily. The latest data from the CoStar Commercial Repeat Sale Indices (CCRSI) suggests that the worst of that decline may be behind the market, at least for now.
Large Investors Make a Cautious Return
The value-weighted U.S. Composite Index, which tracks high-value property transactions, rose by 1.3% in July — the first increase since February. The uptick points to renewed participation from investment firms, pension funds, REITs, and other large buyers that had largely pulled back during the height of the downturn.
While commercial prices remain 21.4% below their July 2022 peak, the year-over-year drop in July narrowed to 1.1%, improving from steeper losses recorded in June.
Markets with lower-priced assets also saw modest gains. The equal-weighted composite index, which reflects activity in smaller markets and among lower-value properties, rose by 0.3% for the month. On a yearly basis, prices in those areas were up 0.7%, standing just 1.9% below their recent high in March.
Sales Volume Slips Monthly But Jumps Year Over Year
Although prices ticked up, total transaction activity in July declined slightly from June. About 1,500 repeat sales were recorded, totaling $10.7 billion, which is a 4.4% drop from the previous month. However, that figure marked a 9.1% increase compared to July of the previous year, signaling stronger market interest overall.
Investment-grade properties accounted for much of the yearly rise. Over the past 12 months, repeat sales totaled $133 billion, up 27% year-over-year, with high-value assets showing a 33% increase.
At the same time, more sellers appear to be holding off on completing deals. The rate at which listings were withdrawn before sale climbed for the fifth straight month, reaching nearly 27% in July. This trend suggests that property owners may be opting to wait in hopes of securing better prices in the months ahead.
Despite the rise in withdrawals, the average sale price remained stable, with properties selling for approximately 92.7% of their asking prices — a figure unchanged from last year.
Distress Sales Remain Rare
Distressed transactions made up a small portion of the market. In July, just 3.4% of repeat sales involved distressed assets. Among high-grade properties, distressed deals accounted for 7.7% of trades, while only 2.6% of general commercial deals fell into that category.
The CCRSI data — based on 1,482 repeat sales in July and a total of more than 329,000 such transactions since 1996 — offers one of the most comprehensive views of pricing trends in the commercial real estate sector. The July rebound suggests cautious optimism may be returning to a market that has been under pressure for much of the past two years.
