May 25, 2016
Commercial Property Price Growth Bounced Back In April after First Quarter Slowdown
Strong Liquidity Measures Signal Healthy Investor Sentiment
CCRSI RELEASE – MAY 2016
(With data through APRIL 2016)
This month's CoStar Commercial Repeat Sale Indices (CCRSI) provides the market's first look at commercial real estate pricing trends through April 2016. Based on 1,289 repeat sale pairs in April 2016 and more than 160,000 repeat sales since 1996, the CCRSI offers the broadest measure of commercial real estate repeat sales activity.
CCRSI National Results Highlights
- COMMERCIAL PROPERTY PRICE GROWTH PICKED UP IN APRIL AFTER A SLOW FIRST QUARTER. Price growth among the two major CCRSI indices rebounded in the month of April 2016, with growth of 0.9% for the value-weighted U.S. Composite Index and 0.6% for the equal-weighted U.S. Composite Index. The increased property sales activity and price growth followed a slowdown in the first quarter of 2016 as investment activity throttled back amid global economic uncertainty. Quarterly growth in both U.S. Composite Indices in the first quarter of 2016 was the slowest since late 2012. However, the positive outlook for U.S. commercial real estate fundamentals suggests the asset class should continue to attract investment.
- TRANSACTION VOLUME HAS BECOME MORE VOLATILE. Composite pair volume of $33.4 billion year-to-date through April 2016 was down 9.2% from the same period last year. The slowdown mirrored the broader financial market volatility resulting from early-year global economic concerns and particularly affected the investment-grade segment of the market. Transaction volume was down 11.2% in the investment-grade segment and 4.1% in the general commercial segment in the first four months of 2016 from the same period in 2015. The deceleration in trading activity is likely to contribute to more modest price growth in 2016 from the record pace of the last two years.
- OTHER CRE INVESTMENT LIQUIDITY MEASURES SHOW STRENGTH. The gap between buyers and sellers continued to narrow through April 2016. The average time on the market for for-sale properties dropped 19.7% in the 12-month period ended in April 2016. Further, the sale-price-to-asking-price ratio narrowed by 2.9 percentage points in the 12-month period ended in April 2016 to 94.3%, the highest this ratio has been since August 2006. The share of properties withdrawn from the market by discouraged sellers receded by 8.8 percentage points to 30.9% during the 12-month period ended in April 2016.
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, and 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 once, 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.
Keosha Burns, Director of Public Relations, CoStar Group (firstname.lastname@example.org).
For more information about the CCRSI Indices, including the full accompanying data set, research methodology, legal notices and disclaimer, please visit http://www.costargroup.com/costar-news/ccrsi.
About CoStar Group, Inc.
CoStar Group, Inc. (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. LoopNet is the most heavily trafficked commercial real estate marketplace online with more than 10 million registered members. Apartments.com, ApartmentFinder.com and ApartmentHomeLiving.com form the premier online apartment resource for renters seeking great apartment homes and provide property managers and owners a proven platform for marketing their properties. Through an exclusive partnership with Move, a subsidiary of News Corporation, Apartments.com is the exclusive provider of apartment community listings across Move’s family of websites, which include realtor.com®, doorsteps.com and move.com. CoStar Group’s websites attracted an average of approximately 24 million unique monthly visitors in aggregate in the first quarter of 2016. Headquartered in Washington, DC, CoStar maintains offices throughout the U.S. and in Europe and Canada with a staff of approximately 2,600 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, including more modest price growth in 2016 as a result of deceleration in trading activity; the risk that, despite the positive outlook for U.S. commercial real estate fundamentals, the asset class is unable to continue to attract investment at the levels expected; and the risk that liquidity, transaction activity, investor demand, market supply, vacancy rates, absorption and commercial real estate pricing levels and growth will not continue at the levels or with the trends indicated in this release. More information about potential factors that could cause results to differ materially from those anticipated 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, 2015, and Quarterly Report on Form 10-Q for the quarter ended March 31, 2016, each of which is filed with the SEC, including in the “Risk Factors” section of that filing, as well as CoStar’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 or revise any forward-looking statements, whether as a result of new information, future events or otherwise.