Commercial property prices climbed in July as the number of transactions across the United States dropped to a 10-year low.

The pricing upswing reflects volatility in lending and limited deals where only better-performing properties are being bought, according to the latest CoStar Commercial Repeat Sale Indices report.

The U.S. 10-year Treasury yield reached 4.1% in March before falling to 3.3% in April where it hovered before the rate rebounded to 3.97% at the end of June. As a result, “The recent bounce in pricing may reflect the lower interest rates witnessed in the second quarter,” Chad Littell, national director of U.S. capital markets analytics for CoStar Group, said in a monthly report on the indices. The indices are closely watched in the industry as a measure of pricing performance.

The movement has affected property prices this year, according to Littell, as the interest rates lenders charge often move up and down with the Treasury yields.

“If a seller approves a deal in March it wouldn’t close until May/June, and if there were any re-trades or delays caused by due diligence, as has been common recently, it could stretch the closing out a few weeks further,” Littell said. “So, when we see a July sale, it’s telling us how the market was pricing deals in April/May.”

CoStar tracks when the same property is sold again in a process called a repeat sale, and that number in July fell to its lowest level since February 2013, excluding 2020 at the onset of the COVID-19 pandemic.

The number of repeat property sales declined to 929 deals, and total consideration fell to $6.7 billion, a 27.7% drop from the prior month.

CoStar’s equal-weighted U.S. Composite Index, which shows the more numerous, lower-priced property deals more common in smaller markets, rose 1.4% in July. The index edged 0.5% higher in the 12 months ended in July. The index has risen in five of the past six months.

Meanwhile, the value-weighted U.S. Composite Index, which reflects big property sales common in major cities, rose for a second straight month in July, an increase of 1.4% over the prior month. However, the index is down 9.3% in the 12 months ending in July.

In the value-weighted index, price declines have been most evident in multifamily property. Lower pricing has been largely in place for the past 14 months. The index gave up 18% of its value in the 12 months ending in July, even though it rose 1.4% last month.

Value-weighted repeat sales have been down 10 of the past 12 months.

Investment-grade transaction volume tumbled 17.1% to $4.3 billion, while the general commercial segment sank 40.8% from the prior month to $2.5 billion.

Moreover, just 26 of the 929 repeat sales in July, or about 2.8%, were distressed sales. Only six investment-grade distressed sales were recorded in the month, accounting for 0.6% of all repeat sales trades.

“Only the best deals are getting done, and the CCRSI has no way of capturing the deals that don’t trade, which would bring down the overall asset value,” Littell said.

This month’s report is based on 929 repeat sale pairs in July and more than 294,058 repeat sales since 1996.