CCRSI RELEASE – DECEMBER 2012Print Release (PDF)
(With data through October 2012)
This month's CoStar Commercial Repeat Sale Indices (CCRSI) provide the market's first look at October 2012 commercial real estate pricing. Based on 927 repeat sales in October and more than 100,000 repeat sales since 1996, the CCRSI offers the broadest measure of commercial real estate repeat sales activity.
October 2012 CCRSI National Results Highlights
OCTOBER PRICES SHOW LITTLE MOVEMENT: 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.
WITHIN THE EQUAL-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 Fewer properties withdrawn from the market by discouraged sellers is another indication of improving investor sentiment. The number of properties withdrawn from the market in October 2012 declined 7.4% from the prior year.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.
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
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, analytic 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 6.4 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.