CoStar to Introduce the First Comprehensive Repeat Sales Index for Commercial Real Estate

CoStar announced it is launching the CoStar Commercial Repeat Sales Index (CCRSI), the first comprehensive repeat sales index for commercial real estate. The index is intended to provide consistent and timely information to help answer some of the fundamental economic questions regarding the commercial real estate industry, including, "Are prices climbing or falling?" and "On a month-to-month basis are property values going up or down?"

In the last two decades, repeat-sale regression has become increasingly accepted as the most clear-cut and rigorous method to meet investors’ requirements for understanding price movement. The repeat-sale analysis is based on an analysis of commercial properties that have sold more than once without a significant change in building characteristics between sales. Such a measure is fundamentally comparable to stock and bond indices that are based on same-stock (or bond) price changes from one period to the next. In residential real estate, the most well-known repeat-sale index is the S&P/Case-Shiller home price index. Not only has it become the barometer of the health of the nation’s housing market, it has also been used by the Chicago Mercantile Exchange to support and facilitate derivatives trading against housing.

"Currently, there are no effective, non-biased indices to measure commercial real estate price movements, and even less comparative information by property type or geographies," said Andrew Florance, Chief Executive Officer of CoStar Group. "In response to this void, we’ve developed the CoStar Commercial Repeat Sales Index to provide a comprehensive set of benchmarks that investors and other market participants can use to better understand and predict CRE price movements."

CoStar has identified more than 85,000 repeat sale pairs in its U.S. database, which we believe is the largest and most comprehensive comparable sales database in the U.S. commercial real estate industry. We have constructed more than two dozen sub indices using the unique breadth of CoStar’s property and comparable sales data.

National Composite CRE Price Index National Indices by Property Type* Regional Indices* Regional Indices by Property Type Top Ten Metro Market Indices by Property Type General Commercial Office Northeast Northeast: Office, Multi-Family, Industrial, Retail Office All Retail Midwest Midwest: Office, Multi-Family, Industrial, Retail Multi-Family Investment Grade Industrial South South: Office, Multi-Family, Industrial, Retail Industrial Multi-Family West West: Office, Multi-Family, Industrial, Retail Retail

*Available in both equal weighted and value weighted

"An accurate measure of real estate price changes is a critical component to understanding investment or market performance. With commonly used average, median price and price per square foot indices, there are no controls for the ever-changing mix of properties sold during different time periods," added Florance. "Therefore, we do not believe average or median price indices per square foot are useful for rigorous analysis of market cycles. Appraisal-based indices are ineffective because they introduce lag and bias and minimum price cut indices are a circular reference in that they use price to define price."

By covering all levels and all types of CRE transactions, and by using well-tested available methodologies, we believe that CoStar’s indices will provide one of the most comprehensive benchmarks for tracking and analyzing CRE price movements to date. CoStar Group expects to release the initial CoStar Commercial Repeat Sales Index on August 4th, and plans to provide updates the first Wednesday of each month to serve as timely indicators of the overall health of the commercial real estate industry.

Please click here to view the official announcement.