Latest Findings from CoStar's Repeat Sale Indices Offer Insight and Analysis of Commercial Real Estate Sales Activity
CoStar Group released the latest findings of the CoStar Commercial Repeat-Sale Indices
(CCRSI), providing the market's first look at commercial real estate
pricing trends based on property sales that closed through October 2012, and offering the broadest measure of commercial real estate repeat sales activity.
CoStar developed the CCRSI
to provide a comprehensive set of benchmarks that investors and other market participants can use to better understand and predict price movements within the commercial real estate sales market.
Among the key findings from the December 2012 CCRSI are:
COMMERCIAL PROPERTY PRICING SEES LITTLE MOVEMENT IN OCTOBER: The two broadest measures of aggregate pricing for commercial properties within the CCRSI-the equal-weighted U.S. Composite Index and the value-weighted U.S. Composite Index-saw very little change in the month of October 2012, dipping -0.1% and -0.8%, respectively, although both improved over quarter and year-ago levels. Recent pricing fluctuations likely signify a more cautious attitude among investors stemming from uncertainty over U.S. fiscal policy heading into 2013.
- VALUE-WEIGHTED INDEX LIFTED BY MULTIFAMILY SECTOR: The U.S. Value-Weighted Composite Index, which weights each repeat-sale by transaction size or value (and therefore is heavily influenced by larger transactions), fell slightly in October 2012, but this dip in pricing masks differences below the surface. The multifamily component of the index posted strong gains for the month, indicating continued investor interest in that property type as a safe haven investment. Meanwhile, pricing for other property sectors served as a drag on the overall value-weighted index.
- INVESTMENT GRADE SEGMENT CONTINUES TO BENEFIT FROM SEASONAL SURGE: October prices were up 15.8% in a quarterly comparison of the U.S. Investment Grade Index, reflecting 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 CCRSI Investment Grade index gave back some of those gains in the first quarter of the following year as deal volume slowed, a pattern expected to repeat itself in 2013.
- LIQUIDITY INDICATORS ARE IMPROVING: The average time on market for for-sale properties fell 5.5% from the peak in the second quarter of 2012. Similarly, the gap between initial asking and final sales price has closed by almost 2% from year-ago levels. Fewer properties withdrawn from the market by discouraged sellers is another indication of improving investor sentiment. The number of properties withdrawn from the market in October 2012 declined 7.4% from the prior year.
- DISTRESS LEVELS SEE SUBSTANTIAL DECLINE: The number of distressed property trades in October fell to 14.8%, the lowest level witnessed since the first quarter of 2009. This reduction in distressed deal volume should result in higher, more consistent pricing, and lead to enhanced market liquidity, giving lenders more confidence to finance deals.
For additional analysis, please view the full release and latest news coverage.
We believe an accurate measure of real estate price changes is a critical component to understanding investment or market performance. By covering all levels and all types of CRE transactions, and by using well-tested available methodologies, we believe that CoStar’s CCRSI indices will provide one of the most comprehensive benchmarks for tracking and analyzing price movements within commercial real estate.
CoStar plans to release updates for the CCRSI every month to serve as timely indicators of the overall health of the commercial real estate industry.
To access the CoStar Commercial Repeat-Sale Indices, please go to http://www.costar.com/ccrsi/index.aspx.