Latest CoStar Commercial Repeat-Sale Analysis: CRE Pricing Recovery Continues
to Mature and Broaden
Pricing Growth Accelerates Beyond Multifamily Sector, Core Markets
WASHINGTON, Nov. 14, 2012 (GLOBE NEWSWIRE) -- This month's CoStar Commercial
Repeat Sale Indices (CCRSI) provide the market's first look at September 2012
commercial real estate pricing. Based on 845 repeat sales in September 2012
and more than 100,000 repeat sales since 1996, the CCRSI offers the broadest
measure of commercial real estate repeat sales activity.
November 2012 CCRSI National Results Highlights
*COMMERCIAL REAL ESTATE PRICING CLOSES 3^rd QUARTER WITH STRONG GAINS: The
two broadest measures of aggregate pricing for commercial properties
within the CCRSI—the U.S. Value-Weighted Composite Index and the U.S.
Equal-Weighted Composite Index—each posted significant gains in September
2012, increasing by 9.7% and 8.2%, respectively, on a year-over-year
basis. The two components of the equal-weighted U.S. Composite Index (the
Investment Grade and General Commercial indices) both advanced in
September, signifying a broad-based recovery in commercial property
*INVESTMENT GRADE INDEX RIDES SEASONAL SURGE: September 2012 prices are up
15.4% from one year earlier in the U.S. Investment Grade Index, and
property pricing in this category is approaching levels not seen since
early 2009. While the increase reflects the larger recovery in property
pricing, it also is likely part of a seasonal pricing pattern observed
over the last several years in which investment-grade transaction activity
tends to spike during the last few months of the year. In past years, the
corresponding pricing gains in the CCRSI Investment Grade index declined
in the first quarter as deal volume slowed, a pattern expected to repeat
itself in 2013.
*GENERAL COMMERCIAL INDEX PRICING MOMENTUM CONTINUES: The Equal-Weighted
General Commercial Composite Index, which is dominated by smaller, less
expensive properties, increased by 4.3% in the 3^rd quarter 2012, the
largest quarterly gain recorded since the start of the recession. The
General Commercial Index has recovered by 8.2% since its trough in March
*DISTRESS LEVELS DECLINING: Only 18.1% of observed trades in September 2012
were distressed, a level notably lower than the 28.8% average over the
past three years. This reduction in distressed deal volume should lead to
higher, more consistent pricing, and may also improve liquidity by giving
lenders more confidence to finance deals.
Several charts accompanying this release are available at
Quarterly CCRSI Property Type Results
*Multifamily pricing continued to improve in the third quarter of 2012.
This property sector has been leading the pricing recovery among all major
commercial property types in terms of timing and magnitude. The
Multifamily Index advanced by a cumulative 31.9% from the trough in
December 2009, through the third quarter of 2012, putting this sector just
17.4% below its peak pricing level reached in 2007.
*The Office Index was up by 6.5% over year-ago levels as office-using
employment growth outpaced overall employment growth during the past year,
attracting a return of capital and a subsequent rise in pricing. Low
capitalization rates in the multifamily sector have pushed investors in
search of higher yields into alternative property types, which has
contributed to the acceleration in price index growth since the start of
2012 in the office and industrial markets.
*The Industrial Index recorded its highest pricing gain since the beginning
of 2012. The second consecutive quarter of pricing gains may indicate that
the recovery among industrial markets has spread beyond big-box
distribution facilities in primary logistics hubs.
*Pricing gains in the retail property sector have been lower since the
start of the year, although they have demonstrated consistency over the
past four quarters. As of September 2012, the Retail Index has advanced by
6.3% since the beginning of the year, although pricing remains nearly a
third below the peak of the previous cycle.
*The Land Index is finally beginning to pick up thanks to a strong
multifamily and stabilizing single-family market. The Land Index gained
6.3% in the third quarter of 2012, but is still 42% below its peak in
*The Hospitality Index also made promising gains, increasing by a
cumulative 16.3% since the beginning of 2012. This sector was slow to
recover after suffering the steepest cumulative price losses among all the
property types. However, with average room rates on the rise in most
markets, hotels are becoming a more desirable asset class among investors.
Quarterly CCRSI Regional Results
*Among the CCRSI's four major U.S. regional indices, the South Composite
Index turned in the strongest quarterly increase with a 9.5% pricing gain
in the third quarter of 2012, based primarily on exceptional increases in
the multifamily sector, which has been sustained by population growth and
favorable demographics. The industrial sector also helped boost the South
Composite Index, reflecting an increase in manufacturing within the
region. The region advanced by a cumulative 12.3% since its trough in June
*The Midwest Composite Index was the second best performing region in the
third quarter, improving by 4.9%. While pricing in the Midwest's
multifamily sector continued to erode, pricing in the region was buoyed by
the promising sales performance of the industrial and office sectors for
the past several quarters.
*The West Composite Index continued its steady pace of recovery,
benefitting from the continued strong performance of multifamily sales.
September 2012 pricing in this region is now 10.2% above year-ago levels.
*The Northeast has led the recovery for the past two years, thanks to its
above-average concentration of prime markets. Commercial property pricing
in this region has advanced by a cumulative 11.3% after bottoming in 2010,
putting this region closest to its peak level. However, as the recovery
has strengthened and higher initial yields have spread from core coastal
markets to second-tier metros, the region's pace of price improvement has
slowed as well. In fact, since the beginning of 2012, the Northeast
Composite Index has remained flat, and posted a slim 0.8% gain in the
third quarter of 2012.
Quarterly CCRSI Prime Markets Results
*Pricing in the U.S. Multifamily market increased 11.6% through the first
three quarters of 2012. During the same period, the Prime Multifamily
Metros Index has fallen by 4.7%, suggesting that multifamily sales in
second-tier markets (and low-end, smaller units) are contributing the bulk
of recent pricing gains.
*Meanwhile, office price growth has largely centered on the high end of the
market and in core metro areas.The Prime Office Index has advanced 36.1%
from its nadir in late 2009, while the broader U.S. Office Market Index
has fallen 2.7% over the same period.
*With a 10.6% gain, the Prime Industrial Markets Index posted the highest
pricing gains during the third quarter of 2012 reflecting the strong
demand for national distribution hubs. The U.S. Industrial Index advanced
7.7% in the third quarter as well, suggesting pricing bifurcation by asset
class in this sector may be weakening.
*Investor preference remains focused on core retail markets as the Prime
Retail index rose 11.3% from the trough through the third quarter of 2012,
despite recent fluctuations. Property in the broader retail market has
seen a more modest pricing recovery.
More charts accompanying this release are available at
About the CoStar Commercial Repeat-Sale Indices
The CoStar Commercial Repeat-Sale Indices (CCRSI) are the most comprehensive
and accurate measures of commercial real estate prices in the United States.
In addition to the national Composite Index (presented in both equal-weighted
and value-weighted versions), national Investment Grade Index and national
General Commercial Index, which we report monthly, we report quarterly on 30
sub-indices in the CoStar index family. The sub-indices include breakdowns by
property sector (office, industrial, retail, multifamily, hospitality and
land), by region of the country (Northeast, South, Midwest, West), by
transaction size and quality (general commercial, investment grade), and by
market size (composite index of the prime market areas in the country).
The CoStar indices are constructed using a repeat sales methodology, widely
considered the most accurate measure of price changes for real estate. This
methodology measures the movement in the prices of commercial properties by
collecting data on actual transaction prices. When a property is sold more
than one time, a sales pair is created. The prices from the first and second
sales are then used to calculate price movement for the property. The
aggregated price changes from all of the sales pairs are used to create a
For more information about CCRSI Indices, including our legal notices and
disclaimer, please visit http://www.costar.com/ccrsi.
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Headquartered in Washington, DC, CoStar maintains offices throughout the U.S.
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organization. For more information, visit http://www.costar.com.
This news release includes "forward-looking statements" including, without
limitation, statements regarding CoStar's expectations, beliefs, intentions or
strategies regarding the future. These statements are based upon current
beliefs and are subject to many risks and uncertainties that could cause
actual results to differ materially from these statements. The following
factors, among others, could cause or contribute to such differences: the risk
that the trends represented or implied by the indices will not continue or
produce the results suggested by such trends; the risk that investor demand
and commercial real estate pricing will not continue at the levels or with the
trends indicated in this release; the possibility that commercial property
pricing is not experiencing a broad-based recovery; the risk that pricing
trends in the CCRSI Investment Grade index will not be as expected and stated
in this release; the possibility that the reduction in distressed deal volume
does not lead to higher, more consistent pricing or improved liquidity; the
possibility that the recovery among industrial markets has not spread as
suggested in this release; the possibility that hotels will not continue to
become a more desirable asset class among investors; the possibility that
multi-family sales in second-tier markets are not contributing the bulk of
recent pricing gains in the U.S. Multifamily market as suggested in this
release; and the possibility that pricing bifurcation by asset class in the
Prime Industrial Market sector is not weakening. More information about
potential factors that could cause actual results to differ materially from
those discussed in the forward-looking statements include, but are not limited
to, those stated in CoStar's filings from time to time with the Securities and
Exchange Commission, including CoStar's Annual Report on Form 10-K for the
year ended December 31, 2011, and CoStar's Quarterly Report on Form 10-Q for
the quarter ended September 30, 2012, under the heading "Risk Factors" in each
of these filings. All forward-looking statements are based on information
available to CoStar on the date hereof, and CoStar assumes no obligation to
update such statements, whether as a result of new information, future events
CONTACT: Richard Simonelli
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