Office clears, apartments slide in July RCA pricing

MSCI Real Assets reported that the RCA CPPI US National All-Property Index rose 0.2% year over year in July, its slowest annual gain since January 2025, and the composite looks flat only because office prices are up sharply while apartments have now fallen for nine straight months.

CBD office prices led the major property types, up 9.9% annually and 1.6% month over month; suburban office rose 4.0% from a year earlier and 0.4% from June. Retail slipped 0.9% for the year, and the apartment index dropped 4.4% for a ninth straight month, leaving the index's annualized growth pace at 1.2%.

On a monthly basis, CBD office prices rose 1.6% against a 0.1% composite gain, a divergence that says the office clearing trades are not a one-off, and MSCI points to borrowing costs that remain tight. The Fed held its policy rate steady in a divided vote, its chair ruled out softening the inflation target, and investors see scant chance of a near-term cut, so the July pricing data reads as the market's own verdict on capital flows without help from the rate side.

The office gains are the rotation this publication has described: a trade-to-trade clearing where office has moved off mark-to-market appraisals and onto individual transactions with local, vacancy-tolerant buyers setting the comps. The 9.9% CBD index gain is the footprint of those clearing trades, and the suburban rise indicates the bid is broadening. The apartment data reads the opposite way even with buyers still active in small and mid-sized deals, because the price index has not found its floor and the reset is running on current cash flow, not projected growth.

The macro backdrop only widens the divide: with no rate cut priced in, the carry cost that punishes levered apartment purchases stays high, while office buyers underwriting a recovery are already paying up. The slow overall pace is the truest reading: a narrow recovery, not a broad one. PRED's tracking shows July transaction volume at a two-decade high, though data-center sales account for the bulk of it, and the RCA pricing data tells the same story from the other side: the assets that are moving are the ones that have cleared, and the rest are still waiting.

For fund managers, the split forces a practical choice because office positions can now be marked against real trades where the clearing price has already printed, while apartment positions carry more uncertainty as the index searches for a floor. Office underwriting can rest on the transactions; apartment underwriting still needs a discount until the monthly declines stop, and the pricing divergence may itself drive more capital toward office, stretching the gap further.

Morgan Stanley argued earlier this month that the four-year repricing is done and the base is forming. The July index supports that, with a caveat: the base is forming office first. Forget the composite — the month-over-month movement in the apartment index is where the next clearing trade will show up.