Walkability Premium Found in Price Trends for Commercial Property

High Rise Facilities | April 16, 2015
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Real Capital Analytics has launched the RCA & Walk Score Commercial Property Price Indices (CPPI), the first of its kind to quantify the price value of walkability for commercial properties. Walk Score is a single comparative measure of the ease or ‘walkability’ from a given property location to nearby amenities.

Over the past decade, prices for properties located in Central Business Districts (CBDs) have risen 125% while prices for suburban properties that are also considered highly walkable are up 43%. Comparatively, property prices are up just 21-22% for properties in suburban locations that are determined to be either somewhat walkable or car-dependent.

“Walkability matters” said Robert White, RCA Founder, “as prices for commercial properties in highly walkable locations show significantly greater appreciation trends than car-dependent locations. The findings cut across both urban and suburban locales, large and small markets and each of the office, retail and apartment sectors.”

The findings support growing evidence that demographic shifts and preferences have shifted back to urban locations and more dynamic live/work/play environments. The stronger price appreciation trends associated with highly walkable properties reflect both a premium in rents that tenants pay for such locations as well as the increasing demand from investors who recognize the long-term value of walkability and mixed-use developments.

In 2007, RCA launched the first repeat-sales regression (RSR) indices for commercial real estate called the Moody’s/REAL CPPI. These national indices quickly became an industry benchmark and are still published with Moody’s Investors Service as the Moody’s/RCA CPPI. The new indices will be calculated on a quarterly basis and are powered by Walk Score’s unique property database.

The RCA repeat-sale transaction approach produces quality-controlled property price indices and is widely acknowledged as the most accurate way to track real estate price movements. The RCA & Walk Score CPPI are based on pioneering research undertaken by leading academics, Dr. David Geltner of M.I.T.; Dr. Jeffrey Fisher, Professor Emeritus, Indiana University; and Professor Gary Pivo of the University of Arizona.

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Category: Intelligence

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