Tracking Price Trends in Commercial Real Estate
In a dynamic real estate market, it is much easier to track price trends than when the market is stagnant. It is also simpler to track price trends in the residential market than the commercial market due to the volume of sales.
One challenge with tracking the commercial market is finding a model with a volume of sales high enough that it allows us to identify price trends in the industry with a reasonable level of accuracy.
A Model with Broader Implications for Price Trends in CRE
Three-family properties are arguably the simplest form of investor properties. It is a sort of hybrid of residential and commercial. They are small, affordable to many investors, and have a geographical distribution similar to other commercial property types. Due to the large supply and demand of three-family properties, there tend to be frequent sales, which makes it simpler to track trends in demand and selling price. Properties with the same number of units are also fairly consistent in selling price, regardless of geographical location.
Though utilizing the three-family property model to identify price trends in commercial real estate can provide valuable insights into price trends throughout the industry, it should be noted that in some, select locations the motivation for purchasing a three-family property is not strictly for investment, but also for redevelopment into condominium units. Those areas need to be avoided when tracking price trends and have been omitted from Zaxia’s trend reports.
Insights You Can Use
Zaxia has begun to track three-family property prices in the Greater Boston area, and has compiled the data collected into charts which illustrate the median price trends and volume of sales for this model. These charts could easily be used in an evaluation report or appraisal to provide insight into trends in the commercial real estate industry at large.
Our data shows that prices for three-family properties continued to rise through Q2 2020 despite the pandemic. As illustrated in the trend charts presented on the new Market Trends page here at Zaxia.us, some areas in Greater Boston saw an increase in demand (sales volume) for three-family properties, while others, like Worcester, saw a decrease in demand. Generally speaking, price trends in Worcester are typical of the Greater Boston area.
On the Market Trends page, you will find all of Zaxia's currently available trend charts, explaining the quarterly median price trends and volume of sales of three-family properties for several areas in Greater Boston. We will be keeping this page updated, so check back often to find valuable insights you can use in your reporting.