Commercial Property Prices Tick Up
Commercial property prices, including industrial assets, have edged higher in early March as the market awaits the Federal Reserve’s next move on interest rates. Analysts note a “fragile optimism,” with investors and tenants closely watching inflation trends and global volatility.
Green Street's Commercial Property Price Index (CPPI) now sits at 130.5, with the core sector index at 130.8. These figures, while up 3% and 2% respectively year-on-year, remain significantly below their 2022 peaks, with all-property down 16% and core sectors off 18%. Data centers are a notable exception, showing the strongest monthly gain with values up 1.3% in February and 7% over the past year. The Federal Reserve held interest rates steady at its January meeting, maintaining a target range of 3.50% to 3.75% for the federal funds rate. Rate cuts of 75 basis points occurred in the latter half of 2025, preceded by 100 basis points of cuts in 2024, and a series of hikes in 2022 and 2023. The central bank's monetary policy aims to respond swiftly to economic developments, with a focus on inflation and labor market data. CBRE forecasts a slowdown in annual U.S. GDP growth to 2.0% in 2026, alongside softening labor market conditions and a slight decrease in inflation, averaging 2.5%. Despite these challenges, commercial real estate investment activity is projected to increase by 16% in 2026, reaching $562 billion, nearly matching pre-pandemic levels from 2015-2019. Cap rates for most property types are expected to compress by 5 to 15 basis points. In the Inland Empire, industrial rents average around $13.25 per square foot annually, but can fluctuate based on location and building standards. The industrial availability rate has increased significantly, from 3.06% in Q4 2021 to 11.2% currently, leading to an average lease rate decline of about 23% since Q3 2023. However, construction starts have plummeted, signaling a potential supply gap by late 2026.
