Jun 10, 2015
Commercial Real Estate Price Growth Moderated In April Following First Quarter Surge
Improving Liquidity Measures Signaled Stronger Market for Sellers
Improving Liquidity Measures Signaled Stronger Market for Sellers
CCRSI RELEASE – JUNE 2015
(With data through April 2015)
This month's CoStar Commercial Repeat Sale Indices (CCRSI) provides the market's first look at April 2015 commercial real estate pricing. Based on 1,154 repeat sales in April 2015, and more than 130,000 repeat sales since 1996, the CCRSI offers the broadest measure of commercial real estate repeat sales activity.
CCRSI National Results Highlights
- COMPOSITE PRICE INDICES LEVEL OFF IN APRIL. Following strong gains of more than 5% in the first quarter of 2015, composite CRE prices saw a slight dip in April as overall sales activity moderated from its recent robust pace. The value-weighted U.S. Composite Index and the equal-weighted U.S. Composite Index decreased by 0.7% and 0.8%, respectively, in the month of April. Both indices have risen more than 2% over the last three months and are up more than 12% for the annual period ending in April 2015.
- BOTH THE HIGH AND LOW END OF THE MARKET SAW MORE MODERATE GROWTH FOR THE MONTH. Within the equal-weighted U.S. Composite Index, the U.S. Investment Grade segment, which is weighted toward high-value properties, decreased by 1% in April 2015, while the U.S. General Commercial segment, which includes sales of lower-tier properties, declined by a similar 0.8% during the same period. However, both indices remain positioned for a continued recovery. Pricing in the Investment Grade Index has moved up by 53.3% from its 2010 nadir to 7.2% below its prior peak, while the General Commercial Index, which began its recovery later, has moved up by 36.7% from its trough in 2011 and is now within 12.3% of its previous peak level.
- TRAILING 12-MONTH COMPOSITE PAIR SALES VOLUME REMAINED STRONG DESPITE RECENT SLOW PACE. Sales volume in April 2015 was down nearly 24% from the record-setting monthly pace set in the first three months of the year (repeat-sale transaction volume in the first quarter of 2015 was the highest first-quarter total since the CCRSI began.) However, April 2015 sales volume was still well above April 2014’s monthly total, and contributed to strong gains on an annual basis. In fact, U.S. Composite Index pair volume of $112.6 billion for the 12 months ending in April 2015 marked a 30% increase from the prior 12-month period, indicating that investment flows into real estate remain strong.
- OTHER LIQUIDITY MEASURES SHOWED IMPROVEMENT. The sale price-to-asking-price ratio tightened by three percentage points in the 12-month period ending in April 2015 to 91.5% — the highest ratio since the summer of 2008 — as buyer and seller expectations continued to grow closer. Additionally, the average time on market for for-sale properties fell 7.2%, and the share of properties withdrawn from the market by discouraged sellers declined by five percentage points to 33.2% in the 12 months ending in April 2015.
- DISTRESS SALES CONTINUE TO DECLINE. The distress percentage of total observed sale pair counts fell to 6.2% in the first four months of 2015, well down from a peak of 32% in 2010.
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.
Richard Simonelli, Vice President (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://www.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 9.6 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 Group operates websites with over 22 million unique monthly visitors in aggregate during March 2015. Headquartered in Washington, DC, CoStar maintains offices throughout the U.S., Canada and Europe with a staff of approximately 3,000 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 risk that investor demand and commercial real estate pricing levels will not continue at the levels or with the trends indicated in this release and the risk that the U.S. General Commercial segment and U.S. Investment Grade segment within the equal-weighted U.S. Composite Index do not continue to see the recovery trends recently realized. 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 March 31, 2015, 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.