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Federal Reserve’s Flow of Funds Analysis to Incorporate CoStar Group’s Price Indices as a Measure of Commercial Real Estate Values

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Economy-wide Performance Indicator to Begin Using CoStar Commercial Repeat Sale Indices (CCRSI) for Analysis Covering Commercial Real Estate and Apartment Buildings

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WASHINGTON, DC – June 4, 2012 – CoStar Group, Inc. (NASDAQ: CSGP), commercial real estate's leading provider of information, analytic and marketing services, today announced that data on commercial real estate property sales, which informs the CoStar Commercial Repeat Sale Indices (CCRSI) is expected to be compiled as part of the “Flow of Funds Accounts of the United States” (Z.1) data release published by the Board of Governors of the Federal Reserve System.

Considered an important and valuable indicator of economy-wide performance, the Flow of Funds accounts analyze economic data on borrowing, lending and investment throughout various sectors of the economy, such as households, businesses and farms. Data from the Flow of Funds accounts can be used to analyze the financial strength of the economy at a certain time and provide insight on future economic performance. The accounts can also be used to formulate monetary and fiscal policy.

The Federal Reserve System’s Division of Research and Statistics plans to incorporate CoStar’s repeat sale indices as a measure of the value of commercial real estate and apartment buildings beginning with the June 2012 Flow of Funds report.  

“We are extremely honored by the decision to incorporate the CoStar Commercial Repeat Sales Indices in the Federal Reserve’s Flow of Funds Accounts,” said CoStar Group Founder and CEO Andrew C. Florance. “Dr. Ruijue Peng and her colleagues at CoStar’s Property and Portfolio Research subsidiary have performed groundbreaking work in formulating and producing this important pricing analysis, which is rapidly gaining acceptance as an industry benchmark. By covering all levels and all types of commercial real estate sales transactions, and by using well tested repeat-sale methodologies, we believe that CoStar's repeat-sale indices provide one of the most rigorous and comprehensive methods for tracking and analyzing price movements within the $12 trillion U.S. commercial real estate asset class.”

CoStar Group launched the CoStar Commercial Repeat Sales Indices in August 2010. The indices are available in both equal-weighted and value-weighted versions. In addition to reporting three national price indices each month – Investment Grade, General Commercial and a Composite Index – the CCRSI includes price indices for specific regions and property types, as well as the 10 largest metropolitan areas on a quarterly basis.

Over the past two decades, repeat-sale regression analysis has become increasingly accepted as the most clear-cut and rigorous method for understanding price movements. The repeat-sale analysis, which compares the change in price for the same property between its most recent and previous sale transactions, is fundamentally comparable to stock and bond indices, based on same-stock (or bond) price changes from one period to the next.

The quality of a repeat-sale index depends to a great extent on the underlying data. CoStar began collecting commercial property transaction data more than 20 years ago and has a total of 1.7 million commercial property sales records in its database, which is believed to be the largest and most comprehensive comparable sales database in the U.S. commercial real estate industry. CoStar’s research covers commercial property transactions throughout the United States and across all price ranges. This extensive database contains a multitude of repeat transactions, which made it possible to develop the consistent and comprehensive price indices featured in the CCRSI. 

About CoStar Group, Inc.

CoStar Group (NASDAQ: CSGP) is commercial real estate's leading provider of information, analytics services and marketing. 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 5.8 million registered members and 3.6 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 www.costar.com.