Fitch: CRE Volatility Likely to Fall

Volatility in the U.S. commercial real estate markets is likely to continue declining this year, with the office sector leading the way, according to the latest Property Market Metric annual report from Fitch Ratings.Fitch's overall volatility score fell 23 basis points in 2006 from the average 2005 score, with office-sector volatility dropping 40 bps in primary markets. "Office volatility scores are expected to continue to improve, especially in primary markets, despite a recent uptick in overall office vacancy rates and delinquencies in the first quarter," said senior director Patty Bach. Primary office markets with lower volatility scores include: New York City (including Jersey City); Los Angeles; San Diego; San Jose, Calif.; Chicago; Dallas/Fort Worth; Austin, Texas; San Antonio; Denver; Philadelphia; Miami; and Seattle. The multifamily sector continued to have the lowest overall volatility score in Fitch's study, with average volatility falling 13 bps to 1.60 for primary markets in 2006. Average volatility among hotel properties fell from 4.34 to 4.21 in 2006. Fitch can be found online at http://www.fitchratings.com.