Latest CoStar Commercial Repeat Sale Analysis: Real Estate Prices Post Steady Gains in October
December 17 2014 - 4:30PM
This month's CoStar Commercial Repeat Sale Indices (CCRSI) provides
the market's first look at October 2014 commercial real estate
pricing. Based on 1,419 repeat sales in October 2014 and more than
130,000 repeat sales since 1996, the CCRSI offers the broadest
measure of commercial real estate repeat sales activity.
Several charts accompanying this release are available at
http://media.globenewswire.com/cache/9473/file/30862.pdf
CCRSI National Results Highlights
- CRE PRICES ROSE STEADILY IN OCTOBER, SUPPORTED BY BROAD BASE OF
POSITIVE TRENDS. Most major property types continued to benefit
from minimal speculative construction, a firming economic recovery
and rising rental rates. Meanwhile, benchmark interest rates such
as the 10-year Treasury continued to decline in October, a positive
underlying trend for commercial real estate cap rates. The two
broadest measures of aggregate pricing for commercial properties
within the CCRSI — the value-weighted U.S. Composite Index and the
equal-weighted U.S. Composite Index — increased by 0.8% and 0.9%,
respectively, for October 2014.
- VALUE-WEIGHTED U.S. COMPOSITE INDEX HITS RECORD HIGH IN
OCTOBER, SIGNALING STRONG DEMAND FOR LARGE, INSTITUTIONAL-GRADE
PROPERTIES. After climbing 0.9% in the month of October, the
value-weighted U.S. Composite Index reached a record high, thanks
to steady gains in recent months. The index now stands 3.9% above
its prerecession peak in 2007, reflecting strong competition among
investors for large, high-end commercial properties.
- EQUAL-WEIGHTED U.S. COMPOSITE INDEX MOVES WITHIN 15% OF ITS
PRERECESSION HIGH. While its recovery began later, the
equal-weighted U.S. Composite Index, which is influenced by smaller
property sales, has made solid gains and is now back to 2005
levels, although it remains 15% below its 2007 prerecession
peak. This reflects the general movement of investment capital
in search of higher yields into secondary markets and property
types, as pricing for commercial property has escalated in the core
coastal markets. Within the equal-weighted U.S. Composite
Index, the U.S. Investment Grade segment, which is weighted towards
high-value properties, has increased by 15.8% for the 12 months
ending in October 2014, while the U.S. General Commercial segment,
made up of lower-tier properties, rose by 14.6% during the same
period.
- PROPERTY SALES ACTIVITY CONTINUES TO INCREASE AT DOUBLE-DIGIT
RATE. Composite pair volume of nearly $78 billion1 year-to-date
through October 2014 marked a 23% jump from the same period in
2013. This is a healthy acceleration considering that composite
pair volume increased by 22% in 2013 and 25% in 2012, and indicates
that investment flows into real estate remain strong. Repeat
sale pair volume in the General Commercial segment rose 27%
year-to-date as of October 2014, edging out growth of 21% in the
Investment Grade segment as capital continues to move out on the
risk spectrum.
- OTHER MEASURES OF LIQUDITY CONTINUED TO IMPROVE. The sale
price-to-asking-price ratio narrowed by 2.5 percentage points in
the 12-month period ended in October 2014 to 90.4% — the highest
ratio since 2008. Meanwhile, the average time on market for
properties listed for sale fell 4.3% in the 12 months ending in
October 2014, and the share of properties withdrawn from the market
by discouraged sellers continued to recede, falling to 35.3%.
1 Does not include the $4.4 billion sale of Stuyvesant
Town-Peter Cooper Village apartments in New York City in June 2014
via deed in lieu of foreclosure.
Monthly CCRSI Results, Data through October of
2014
|
1 Month
Earlier |
1 Quarter
Earlier |
1 Year
Earlier |
Trough to
Current |
Value-Weighted
U.S. Composite Index |
0.9% |
3.8% |
10.0% |
67.0%1 |
Equal-Weighted
U.S. Composite Index |
0.8% |
3.5% |
14.7% |
33.2%2 |
U.S. Investment
Grade Index |
1.5% |
4.8% |
15.8% |
47.4%3 |
U.S. General
Commercial Index |
0.7% |
3.4% |
14.6% |
31.7%4 |
1 Trough Date: January
2010 2 Trough Date: March 2011 3 Trough Date: March
2010 4 Trough Date: March 2011 |
Monthly Liquidity Indicators, Data through
October of 2014
|
Current |
1 Month
Earlier |
1 Quarter
Earlier |
1 Year
Earlier |
Days on
Market |
402 |
405 |
408 |
421 |
Sale
Price-to-Asking Price Ratio |
90.4% |
89.8% |
89.4% |
87.9% |
Withdrawal
Rate |
35.3% |
36.1% |
37.5% |
43.1% |
1 Average days on market and sale-price-to-asking-price ratio
are both calculated based on listings that are closed and confirmed
by CoStar's research team. The withdrawal rate is the ratio of
listings withdrawn from the market by the seller to all listings
for a given month.
About the CoStar Commercial Repeat-Sale
Indices
The CoStar Commercial Repeat-Sale Indices (CCRSI) is the most
comprehensive and accurate measure 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.
More charts accompanying this release are available at
http://media.globenewswire.com/cache/9473/file/30863.pdf
For more information about the CCRSI Indices, including the full
accompanying data set and research methodology, please visit
http://costargroup.com/costar-news/ccrsi.
ABOUT COSTAR GROUP, INC.
CoStar Group (Nasdaq:CSGP) is the leading provider of commercial
real estate information, analytics and online marketplaces. 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 9.0 million registered members. Apartments.com is a
premier online apartment resource for renters that matches
apartment seekers with great apartment homes and provides property
managers and owners a proven platform for marketing their
properties. CoStar operates websites with over 17.5 million unique
monthly visitors in aggregate during third quarter of 2014.
Headquartered in Washington, DC, CoStar maintains offices
throughout the U.S., Canada and Europe with a staff of over 2,300
worldwide, including the industry's largest professional research
organization. For more information, visit www.costargroup.com.
This news release includes "forward-looking statements"
including, without limitation, statements regarding CoStar's
expectations, beliefs, intentions or strategies regarding the
future. These statements are based upon current beliefs and are
subject to many risks and uncertainties that could cause actual
results to differ materially from these statements. The following
factors, among others, could cause or contribute to such
differences: the risk that the trends represented or implied
by the indices will not continue or produce the results suggested
by such trends; and the risk that investor demand and commercial
real estate pricing levels will not continue at the levels or with
the trends indicated in this release. More information about
potential factors that could cause actual results to differ
materially from those discussed in the forward-looking statements
include, but are not limited to, those stated in CoStar's filings
from time to time with the Securities and Exchange Commission,
including in CoStar's Annual Report on Form 10-K for the year ended
December 31, 2013, and Quarterly Report on Form 10-Q for the
quarter ended September 30, 2014, each of which is filed with the
SEC, including in the "Risk Factors" section of those filings, as
well as the company's other filings with the SEC available at the
SEC's website (www.sec.gov). All forward-looking statements are
based on information available to CoStar on the date hereof, and
CoStar assumes no obligation to update such statements, whether as
a result of new information, future events or otherwise.
CONTACT: Mark A. Klionsky
Senior Vice President-Marketing
mklionsky@costargroup.com
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