Finance  ·  CMBS

Valuation Trends in the First Half of 2023

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CRED iQ examined 190 appraisals of major properties across all asset classes to determine the impact of current market conditions on asset values. The most notable declines in valuation were dominated by retail and office properties.  

Across $10 billion in assets, CRED iQ noted an average 41.2 percent decline in valuation from the original appraised value. By segment, retail properties experienced the highest decline in value at 57 percent, led by several large malls. 

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The office sector was close behind with an average valuation decline of 48.7 percent. Self-storage, on the other hand, remained robust with no properties reporting a decline in valuation from specially serviced assets.

The 248,457-square-foot retail condo at 229 West 43rd Street in New York City’s Times Square topped our list with a jaw-dropping $386 million valuation decline, while Gas Company Tower, a 1,377,053-square-foot office tower in Los Angeles came in a close second, with a $362 million value decline.   

Woodbridge Center, a 1.1 million-square-foot regional mall in Woodbridge, N.J., saw a 75.5 percent dip in value from $366 million to $86 million, earning it the number three spot on the list. 

In Denver, Wells Fargo Center, a 1.2 million-square-foot office tower in Downtown Denver,  dropped $188 million in value, placing it fifth on our list, just behind Valencia Town Center in Santa Clarita, Calif., a 1.1 million-square-foot retail property whose value declined by more than $200 million from $398 million to $181 million. 

The only non-retail or office property that made our top 10 was the  610-room JW Marriott hotel in the Chicago Loop area, which experienced a $136 million decline.   

Overall, the analysis highlights the need for continued monitoring of real estate assets and their exposure to changing market conditions. The appraisals were based on sales and leasing data from CRED iQ and other reliable sources. 

In conclusion, the current market conditions are significantly impacting the valuation of commercial real estate properties across all asset classes. Retail and office properties are being hit the hardest while self-storage remains resilient. It is crucial to continuously monitor real estate assets and their exposure to changing market conditions.

Mike Haas is co-founder and CEO of CRED iQ.