Oct 14, 2015
Commercial Property Price Growth Continued To Heat Up In August
Robust CRE Space Absorption Bolstered Recent Price Gains
Robust CRE Space Absorption Bolstered Recent Price Gains
CCRSI RELEASE – OCTOBER 2015
(With data through August 2015)
WASHINGTON -- This month's CoStar Commercial Repeat Sale Indices (CCRSI) provides the market's first look at August 2015 commercial real estate pricing. Based on 1,252 repeat sales in August 2015 and more than 145,000 repeat sales since 1996, the CCRSI offers the broadest measure of commercial real estate repeat sales activity.
CCRSI National Results Highlights
- HEALTHY CRE MARKET FUNDAMENTALS SUPPORTED BROAD PRICE GROWTH. While construction is rising in many markets, aggregate demand across the major property types continues to outstrip supply, resulting in tighter vacancy rates and rent growth, which in turn, continues to drive strong investor interest in commercial real estate. In August 2015, 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 1.3% and 1%, respectively, and 12.6% and 11.4%, respectively, in the 12 months ended August 2015.
- GENERAL COMMERCIAL SEGMENT GROWTH CONTINUED TO OUTSTRIP INVESTMENT-GRADE COUNTERPART. Recent stronger growth in the General Commercial segment, which is influenced by smaller, lower-value properties, confirms a broad-based pricing recovery. Within the equal-weighted U.S. Composite Index, the General Commercial segment posted a monthly increase of 1% in August 2015 and 11.9% for the 12 months ended August 2015, propelling the index to within 7% of its prerecession high. Meanwhile, the Investment-Grade segment, which is influenced by larger, higher-value properties, advanced at a more moderate rate of just under 1% in August 2015, and by 9.2% for the 12 months ended August 2015. While growth has slowed in this segment recently, the Investment-Grade Index has moved to within 4% of its prior peak.
- ROBUST CRE SPACE ABSORPTION BODES WELL FOR CONTINUED FAVORABLE PROPERTY SALES CONDITIONS. For the four quarters ended as of the third quarter of 2015, net absorption across the three major property types—office, retail, and industrial—totaled 611.4 million square feet, 20% more than in the four quarters ended as of the third quarter of 2014, and the second-highest annualized absorption total on record since 2008. The office and industrial sectors turned in particularly strong performances during this 12-month period, averaging net absorption of 0.3% and 0.4% of inventory, respectively, while the retail sector averaged a more modest 0.2% in the trailing four quarters ended as of the third quarter of 2015.
- CRE INVESTMENT ACTIVITY CONTINUED TO SURGE. The CCRSI’s U.S. composite pair volume of $79.5 billion year-to-date through August 2015 was a 32% increase compared with the same period in 2014, suggesting that 2015 could be another record year for commercial real estate acquisitions. Both the high and low end of the market are attracting increased capital flows, with volume up by nearly 32% in both the Investment-Grade and General Commercial segments.
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.
Becky Carr, Chief Marketing Officer, CoStar Group (firstname.lastname@example.org).
For more information about the CCRSI Indices, including the full accompanying data set and research methodology, legal notices and disclaimer, please visit the CCRSI website at: http://wwwcostargroup.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 9.8 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. CoStar Group operates websites with over 23.6 million unique monthly visitors in aggregate as of June 2015. Headquartered in Washington, DC, CoStar maintains offices throughout the U.S. and in Europe and Toronto with a staff of approximately 2,900 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 the possibility that the levels of demand and supply may change and adversely impact investor interest in commercial real estate; the level of commercial real estate transaction activity seen through August 2015 is not maintained or increased through the remainder of 2015; the risk that absorption decreases affecting property sales conditions; 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, 2014, and Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, each of which is filed with the SEC, including in the "Risk Factors" section of the filing, 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.