Latest CoStar CCRSI Analysis: Commercial Real Estate Prices See Midyear Surge With Strongest Quarterly Increase Since 2011

Latest CoStar CCRSI Analysis: Commercial Real Estate Prices See Midyear Surge
With Strongest Quarterly Increase Since 2011

Recovery Broadens as General Commercial Segment Edges Out Investment Grade
Properties; Secondary Markets Outperform Primary Markets; And Retail and
Office Pricing Outpaces Multifamily in Second Quarter

WASHINGTON, Aug. 14, 2013 (GLOBE NEWSWIRE) -- This month's CoStar Commercial
Repeat Sale Indices (CCRSI) provide the market's first look at June 2013
commercial real estate pricing. Based on 1,189 repeat sales in June 2013 and
more than 125,000 repeat sales since 1996, the CCRSI offers the broadest
measure of commercial real estate repeat sales activity.

June 2013 CCRSI National Results Highlights

    strength of improving market fundamentals, the two broadest measures of
    aggregate pricing for commercial properties within the CCRSI — the
    value-weighted U.S. Composite Index and the equal-weighted U.S. Composite
    Index — continued their upward trend in June. The value-weighted index,
    which is influenced by larger transactions and generally tracks with high
    quality core real estate properties, gained 5.9% in the second quarter,
    its best quarterly showing since 2011. Meanwhile, the equal-weighted
    index, which is comprised of smaller, more numerous transactions
    representative of the lower end of the market, jumped an impressive 9.1%
    in the second quarter, its strongest quarterly gain on record.
    equal-weighted U.S. Composite Index, the Investment Grade segment, which
    broadly encompasses upper-middle tier properties, continued moving
    steadily upwards, increasing 7.9% above last quarter. Pricing in the
    General Commercial segment has taken longer to recover, but has recently
    gained momentum as investment activity continued to extend into secondary
    markets and property types. Pricing in the General Commercial segment
    advanced a stellar 9.2% from the previous quarter and increased 11.7% over
    the last 12-month period.
    consumer spending and a near dearth in new construction helped to bolster
    pricing gains for retail properties as reflected in the 16% gain in the
    CCRSI Retail Index over the past 12-month period ending in the second
    quarter, the strongest performance of the four major property types.
    Meanwhile, pricing in the Office Index advanced by 11.4%, while the
    Multifamily Index gained a more modest 11.1% year over year. Among CCRSI's
    regional indices, the Midwest regional index recorded the largest regional
    gain of 16.5% for the previous 12-month period ending in the second
    quarter, aided by outsized growth in multifamily and retail pricing
    levels, while the Northeast regional index continued to track the largest
    cumulative pricing gains since the recovery began.
  *DISTRESS SALES CONTINUE TO ABATE: The percentage of commercial property
    selling at distressed prices dropped to just 13.6% in June 2013, down from
    nearly 24% one year earlier, the lowest level of distress recorded since
    the end of 2008. The long-term average for distress trading is less than
    1% of total volume, so the recovery still has a ways to go, but the recent
    declines have helped to boost liquidity and pricing by giving lenders more
    confidence to do deals.

Monthly CCRSI Results, Data through June of 2013
                                1 Month     1 Quarter   1 Year    Trough to
                                Earlier    Earlier     Earlier   Current
Value-Weighted U.S. Composite    2.5%        5.9%        11.8%     47.3%^1
Equal-Weighted U.S. Composite    3.0%        9.1%        12.8%     15.7%^2
U.S. Investment Grade Index     1.5%        7.9%        17.8%     27.5%^3
U.S. General Commercial Index   3.1%        9.2%        11.7%     14.2%^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

  *The leap in commercial real estate pricing in the second quarter was seen
    across all four major property types. Double-digit annual gains in nearly
    every property sector demonstrate the depth of the recovery in commercial
    real estate prices. Pricing in the overall market has increased more
    rapidly than in the primary markets for all the major property sectors
    save industrial, suggesting that investors are either being priced out of
    primary markets or have more appetite for risk as market fundamentals
  *The multifamily sector, which has led the recovery in commercial real
    estate pricing, continued to post strong results. Overall pricing at the
    end of the second quarter of 2013 was just 13.4% shy of the previous peak
    reached in 2007. By comparison, pricing in the other major property types
    is still more than 20% below previous peak levels. While the multifamily
    sector's outperformance has been attributable to relatively stronger
    fundamentals, it has also been a function of plentiful debt financing, led
    by the government-sponsored enterprises (GSEs), following the downturn.
    However, there are signs of a deceleration in multifamily fundamentals,
    mainly as a result of growing new supply, especially in the primary
    markets where vacancies are at, or near, prerecession lows and pricing has
    already surpassed its prior peak level. The CCRSI Multifamily Prime Metros
    Index notched gains of 9.9% over the last year, which was lower than the
    11.1% gain for the broader multifamily index.
  *Reflecting the continued decrease in vacancy rates across most markets,
    the CCRSI Retail Index posted the most impressive pricing gains during the
    second quarter of 2013 of 10.2%.Pricing in the Retail Index is now up 16%
    over the previous 12-month period, the first double-digit annual price
    increase in the Retail Index since its recovery began in 2011. The overall
    retail market outperformed the Prime Retail Metros Index over the past
    year indicating that investors appear to be branching out beyond core
    assets in the primary markets and malls, as has been the case in previous
    quarters. The retail sector's recent pricing rebound is encouraging
    because it suggests that the housing recovery may finally be spilling over
    to the broader economy.
  *Pricing in the Office Index advanced by 11.4% for the previous 12-months
    ending in the second quarter, the second strongest annual performance
    among the major property segments behind the retail sector. Steady demand
    for office space during this time, coupled with historically low levels of
    new construction, has led to the sturdy pricing gains. Investors also
    appear to be looking beyond the core technology and energy-driven markets
    for deals as indicated by the slower growth in the Prime Office Metros
    Index over the last year. The gap in pricing between secondary and top
    tier markets is exceptionally wide right now, indicating that secondary
    markets will likely continue to see a rise in pricing over the near term.
    A strong demand forecast, further expected vacancy compression, and
    relatively cheap pricing are drawing investors to markets like Portland,
    Charlotte and Phoenix, where pricing is rising more rapidly than in the
    core markets of New York and Washington DC, where pricing has already
    surpassed prior peak levels.
  *While the pricing recovery in the industrial property sector began later
    than in the other major property types, the CCRSI Industrial Index
    advanced by a solid 9.5% year-over-year in the second quarter. Big-box
    distribution facilities located in primary logistics hubs have led
    industrial the recovery, which is reflected in the stronger 22% gain in
    the Prime Industrial Metros Index over the last year.
  *The CCRSI Land Index notched modest price gains over the past four
    quarters on the strength of continued demand for multifamily development
    sites and the recovering single-family market. The Land Index gained 1.8%
    in the second quarter of 2013 accumulating 5.1% price gains over the
    previous 12-month period.
  *The CCRSI Hospitality Index also made promising gains over the last year
    increasing by 6.1% from the same quarter of the last year. Hotel demand
    closely correlates with macro economy. With slow but steady economic
    growth, average room rates are on the rise in most markets. As a result,
    hotels are becoming a more desirable asset class among investors.

Quarterly CCRSI Regional Results

  *All four major regional indices in the CCRSI posted positive quarterly and
    year-over-year pricing gains. The Northeast Composite Index, which has
    been bolstered by exceptional pricing growth in a handful of prime
    multifamily and office markets, remained at the forefront of the recovery.
    Accordingly, the Northeast Index has climbed to within 7% of its prior
    peak level in 2007, while pricing in the other regions remains nearly a
    third below their respective previous high water marks. Among specific
    property types, the Northeast Multifamily Index has made an early and
    impressive recovery, already surpassing its prior peak pricing. However,
    as supply levels begin to mount in many markets investors are turning
    their attention to other property types in the region. The Northeast
    Office Index advance by 24.8% over the last year, driven by strong pricing
    gains in the core markets of New York and Boston, and also among secondary
    markets such as Pittsburgh.
  *Pricing is finally gaining some traction in the Midwest. This region has
    been the laggard in the recovery, with pricing finally bottoming out in
    the second quarter of last year, at least a year behind the other regions.
    Since then, a solid recovery in the multifamily and retail segments has
    helped the overall Midwest regional index to advance by 16.5% over the
    last year. Thanks to higher yields and continued investor preference for
    multifamily assets, the Midwest Multifamily Index advanced by an
    impressive 34% over the last year, led by gains in solidly performing
    markets such as Chicago, Minneapolis, Cincinnati and Columbus.
  *As was the case in the Midwest, the multifamily and retail sectors are
    driving recent pricing gains in the South Regional Composite Index.
    Markets that had not seen the first wave of investment capital, including
    Tampa, Orlando and South Florida, have seen stronger pricing gains over
    the last year, helping the overall South Composite Index to advance by
  *Pricing in the West region advanced just 3.9% year-over-year compared with
    a 9% gain in the previous 12-month period. The West Multifamily index led
    overall pricing gains over the last few years as investors flocked to
    supply constrained core markets like San Francisco, San Jose and Los
    Angeles, aggressively bidding up prices. However, as capital is now moving
    to secondary markets and property types in search of higher yields,
    pricing in the West Multifamily Index has flattened over the last year,
    dragging down the total for the region. The West Retail and Office indices
    advanced by a stronger 6% during the same period.

Several 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
price index.

More charts accompanying this release are available at


For more information about CCRSI Indices, including our legal notices and
disclaimer, please visit


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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, including the risk that
transaction volume does not create, or continue to create, a favorable
environment for commercial real estate transaction activity; 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 risk that the
decline in distressed trades will not continue to support higher, more
consistent pricing and enhanced market liquidity; the risk the retail sector's
recent pricing rebound will not spill over to the broader economy; the risk
that the gap in pricing between secondary and top tier markets will not remain
high, and that secondary markets will not see a rise in pricing over the near
term; and the possibility that the hospitality industry cannot continue to
support rising hotel room prices and, therefore, that hotels will not become,
or continue to be, a more desirable asset class. 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, 2012, and CoStar's Quarterly Report on Form 10-Q for
the quarter ended June 30, 2013, 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: Mark Klionsky
         Senior Vice President-Marketing
         (800) 681-1513
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