Transaction prices of commercial properties sold by major institutional investors gained 11.9 percent in the fourth quarter, and 19.3 percent for all of 2010, according to an index developed and published by the MIT Center for Real Estate (MIT/CRE).

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The TBI tracks the prices that institutions such as pension funds pay or receive when transacting commercial properties such as shopping centers, apartment complexes and office towers. The MIT Center’s TBI is based on prices of National Council of Real Estate Investment Fiduciaries (NCREIF) properties sold each quarter from the property database that underlies the NCREIF Property Index (NPI), and also makes use of the appraisal information for all of the currently approximately 6,000 NCREIF properties. Such an index — national, quarterly, transaction-based and by property type, and tracking demand and supply as well as prices — had not been previously constructed prior to its launch by MIT in February 2006. NCREIF supported development of the index as a useful tool for research and decision-making in the industry.

The TBI transaction sample count was down slightly from third quarter (83 vs 94 properties), but for all of 2010 there were 291 TBI transactions versus 184 in 2009. Average transaction value has shot up strongly, with the average 4th-quarter TBI sale almost $45 million, compared to $31million in 3Q. For all of 2010 there was $10.5 billion, compared to a financial crisis low point in2009 of only $4.4 billion averaging $24 million per sale.

Property types that make up the index include:

  • Apartment
  • Hotel
  • Industrial
  • Office
  • Retail

Finally, keep in mind these are institutional transactions of “high quality” properties and may not be reflective of the total CRE market. For instance we have seen vacancy recovery in the Class A office space while Class B office continues to show increasing vacancies due to continued unemployment concerns. And even though the CRE market for these institutional properties are in recovery mode, transactions are only reflective of the late 2004 and early 2005 timeframe.

Silver Oak Advisors is a property tax advisory firm with former Big 4 and Industry experience of over 40 years. We believe ALL real estate valuations used as the basis for property tax assessments should be reviewed to ensure valuations are more reflective of fair market value and thus this operating tax is minimized and improving your bottom line.

Contact us if you have questions regarding your assessment(s).

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