Latest CoStar CCRSI Analysis: U.S. Commercial Real Estate Market Posts Record Gain in Sales Volume and Broadening Pricing

Latest CoStar CCRSI Analysis: U.S. Commercial Real Estate Market Posts Record
Gain in Sales Volume and Broadening Pricing Recovery to Close 2012

Pricing Recovery Matures Beyond Multifamily to Other Property Types and
Expands to More Secondary Markets

WASHINGTON, Feb. 13, 2013 (GLOBE NEWSWIRE) -- This month's CoStar Commercial
Repeat Sale Indices (CCRSI) provide the market's first look at December 2012
commercial real estate pricing. Based on 1,593 repeat sales in December 2012
and more than 100,000 repeat sales since 1996, the CCRSI offers the broadest
measure of commercial real estate repeat sales activity.

December 2012 CCRSI National Results Highlights

  *COMMERCIAL REAL ESTATE SALES VOLUME SURGED IN 2012: While rising steadily
    over the last four years, sales volume reached nearly $64 billion in 2012,
    a 22% increase from 2011 and the highest annual total since 2004. Activity
    spiked significantly in December as investors rushed to close deals prior
    to year-end. In fact, at 1,593, the number of repeat sales in December
    reached an all-time high since CoStar started tracking the property sales
    used in the CCRSI. Both the investment grade and general commercial
    segments were heavily traded as improving market fundamentals and
    attractive yields relative to other asset classes drove strong investor
    interest in commercial real estate.
    
  *VALUE-WEIGHTED INDEX PRICING EXPECTED TO MODERATE:Pricing gains in the
    value-weighted U.S. Composite Index began earlier in the recovery and have
    been consistently stronger than pricing gains in its equal-weighted
    counterpart throughout much of the recovery.This reflects the more rapid
    recovery at the high end of the market for larger, more expensive
    properties.It also mirrors the trend in the recent recovery of market
    fundamentals for commercial property, in which demand for Four-Star and
    Five-Star office buildings, luxury apartments and modern big-box
    warehouses has outpaced the broader market. However, pricing trends
    suggest this may be shifting.
    
  *RECOVERY BROADENS TO LOWER END OF THE PRICING MARKET: Despite the recent
    dominance of larger, more-expensive properties in pricing gains, momentum
    appears to be shifting to the broader market dominated by smaller,
    less-expensive properties. This shift is apparent in the value-weighted
    U.S. Composite Index, which posted a 4.3% year-over-year gain in December
    2012, slowing from its double-digit growth rate throughout 2011. At the
    same time, year-over-year growth in the equal-weighted U.S. Composite
    Index accelerated in the second half of 2012 and registered 8.1% for the
    year. Taken together, the two trends signify that investors are moving
    beyond core properties and driving up pricing at the lower end of the
    market.
    
  *NEW MULTIFAMILY CONSTRUCTION RESPONDING TO PRICING GAINS:The multifamily
    property type index advanced by 11.2% in 2012, well ahead of the other
    major property types.Within the sector, pricing for the ten markets in
    the prime multifamily index has regained pre-recession peak levels,
    reflecting the strong investor interest in the segment of the market that
    has led the overall recovery in commercial real estate pricing.However,
    construction is now picking up steam in response to the rapid surge in
    prices. Twice as many multifamily units delivered in 2012 as in 2011 and
    construction in 2013 is on pace to rise even further. Meanwhile, modest
    levels of construction in the other property types indicate that further
    pricing gains are needed before supply ramps up significantly for property
    types other than multifamily properties and core markets.
    
  *DISTRESS LEVELS DECLINING. Distressed sales made up only 11.5% of observed
    trades in December 2012, the lowest level witnessed since the end of 2008.
    This reduction in distressed deal volume has been driving higher, more
    consistent pricing.

Monthly CCRSI Results, Data through December 2012

                                1 Month    1 Quarter    1 Year    Trough to
                                 Earlier    Earlier      Earlier   Current
Value-Weighted U.S. Composite    0.0%       0.9%         4.3%      37.1%^1
Index
Equal-Weighted U.S. Composite    3.0%       4.6%         8.1%      12.8%^2
Index
U.S. Investment Grade Index     0.8%       -3.6%        -3.6%     15.6%^3
U.S. General Commercial Index   3.4%       6.0%         10.7%     13.0%^4
^1 Trough Date: January, 2010^2 Trough Date: March, 2011^3 Trough Date:
October, 2009^4 Trough Date: March, 2011

Quarterly CCRSI Property Type Results

  *While the single-family housing market's burgeoning recovery has grabbed
    the headlines, the multifamily property sector has led the recovery in
    commercial property pricing in terms of timing and magnitude. The broader
    Multifamily Index posted double-digit gains over the past year, while
    pricing in the Prime Multifamily metros has now surpassed its
    pre-recession peak set in mid-2007. These gains reflect the strong
    fundamentals of the multifamily market, where vacancies have compressed by
    220 basis points since 2009 and rents have also recovered to surpass their
    pre-recession peak. However, construction has surged in response to these
    favorable conditions, especially in primary markets that have been at the
    forefront of the recovery.As the pricing recovery expands beyond
    multifamily, this sector's stellar pace of growth is beginning to
    moderate. The multifamily sector recorded only a 1.4% gain in the fourth
    quarter, the lowest percentage increase among all major property types,
    even though annual pricing gains for the multifamily sector topped all
    others.
    
  *Despite posting uneven gains over the past couple of years, the Office
    Index advanced at a healthy clip in 2012 as fundamentals in the sector
    continued to strengthen. Higher pricing in the multifamily sector also
    pushed capital to alternative property types in search of higher
    yields.Pricing gains in the office sector have proven to be more robust
    in the core coastal metros and in tech-centric markets than in the overall
    market. As such, the Prime Office Index advanced by 14.4% for the year end
    in December 2012, while the broader property type index expanded at a more
    modest 4.6% pace over the same period.
    
  *The recovery of industrial property pricing has been dampened as the
    European recession has reduced U.S. exports. The Industrial Index was the
    only major property type index to continue to post mild pricing losses
    into early 2012. Since then, however, pricing in this sector has begun to
    pick up momentum. The broader property type index advanced 8% from a year
    ago. Meanwhile, the recovery to date has centered on big-box distribution
    facilities located in primary logistics hubs, as the Prime Industrial
    Metros Index was up 20.4% for the year.
    
  *Mirroring the slow but steady improvement seen across most market
    fundamentals, pricing in the retail sector has demonstrated consistency
    over the last six quarters.While investors remain cautious, pricing has
    advanced by 6.8% during the year ended December 2012.The retail prime
    markets index advanced by a stronger 15.7% over the last year indicating
    investors may still be hesitant to venture too far out on the risk
    spectrum at this point in the cycle.
    
  *The CCRSI Land Index showed signs of recovery over the past two quarters
    due to strong demand for multifamily development sites and the stabilizing
    single-family market. The Land Index gained 3.6% in the last quarter of
    2012 but is still 39.9% below its peak in December 2007.
    
  *The Hospitality Index also made promising gains last year, increasing by a
    cumulative 22.2% in December 2012 since December 2011. This sector was
    slow to recover after suffering the steepest cumulative price losses among
    all the property types during the recent recession. However, with average
    room rates on the rise in most markets, hotels are becoming a much more
    desirable asset class among investors.

Quarterly CCRSI Regional Results

  *Among CCRSI's four major U.S. regions, the West Composite Index was the
    only region with negative quarterly pricing movement. However, despite a
    1.1% decline in the fourth quarter of 2012, this region had the strongest
    recovery on an annual basis, rising 9.0% in 2012. As with the U.S. as a
    whole, the exceptional pricing gains in the West region were driven by the
    multi-family sector, which was sustained by strong population growth and
    favorable demographics.
    
  *The Northeast region has led the pricing recovery in commercial real
    estate for the past two years, thanks to its above-average concentration
    of prime markets. However, as the recovery has expanded from core coastal
    markets to second-tier metros offering investors higher initial yields,
    the Northeast region's pace of price improvement has slowed. Over the last
    year, the Northeast region posted the slowest annual gain of 5.5%.
    
  *CCRSI's South Composite Index continued its moderate pace of recovery.
    Strong pricing performance of industrial and multifamily sectors are the
    primary reason for the recovery of this region, which advanced by 6.7%
    annually in 2012.
    
  *After a lackluster first and second quarter 2012 performance, the Midwest
    Composite Index expanded in the last half of the year, primarily resulting
    from exceptional increases in the office and multifamily pricing in this
    region. Overall, pricing in the Midwest advanced by a cumulative 6.5% in
    2012.

Several charts accompanying this releaseare available at
http://media.globenewswire.com/cache/9473/file/18107.pdf

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
price index.

More charts accompanying this release are available at
http://media.globenewswire.com/cache/9473/file/18108.pdf

CONTACT:

For more information about CCRSI Indices, including our legal notices and
disclaimer, please visit http://www.costar.com/ccrsi.

ABOUT COSTAR GROUP, INC.

CoStar Group (Nasdaq:CSGP) is commercial real estate's leading provider of
information, analytics and marketing services. Founded in 1987, CoStar
conducts expansive, ongoing research to produce and maintain the largest and
most comprehensive database of commercial real estate information. Our suite
of online services enables clients to analyze, interpret and gain unmatched
insight on commercial property values, market conditions and current
availabilities. Through LoopNet, the Company operates the most heavily
trafficked commercial real estate marketplace online with more than 6.5
million registered members and 3.5 million unique monthly visitors.
Headquartered in Washington, DC, CoStar maintains offices throughout the U.S.
and in Europe, including the industry's largest professional research
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 levels will not continue at the levels or
with the trends indicated in this release; the possibility that pricing trends
may not reflect an actual shift in demand for particular property types; the
possibility that momentum is not shifting to the broader market dominated by
smaller, less-expensive properties or that investors are moving beyond core
properties or prime markets and driving up pricing at the lower end of the
market; the possibility that pricing gains will not result in increased supply
of properties; the risk that a continued reduction in distressed deal volume
will not continue to result in higher, more consistent pricing; and the risk
that hotels will not become or remain a more desirable asset class among
investors . 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 or otherwise.

CONTACT: ALL INQUIRIES:
         Richard Simonelli
         Director of Investor Relations
         (202) 346-6394
         rsimonelli@costar.com
 
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