PRESS RELEASE DETAIL


Nov 01, 2010

CoStar Commercial Repeat-Sale Indices, November 2010

2010-11-03 2010 HAVE COMMERCIAL REAL ESTATE PRICES BOTTOMED OUT? COSTAR COMMERCIAL REPEAT-SALE INDICES UP SECOND MONTH IN A ROW

Print Release (pdf)

CoStar Commercial Repeat-Sale Indices, November 2010

  • Investment grade real estate continued its positive pricing trend from August with a strong 5.48% increase in September based on the just-released CoStar Commercial Repeat-Sale Indices (CCRSI).
  • For the first time since the second quarter of 2007, the four primary property types within the commercial real estate repeat sales index showed an increase in pricing in the third quarter.
  • The CoStar investment grade real estate index remains down 4.89% from the same period last year, and down 29.08% from two years ago. However, for the third quarter, the investment grade real estate index increased 5.46%. This is a significant reversal from the previous quarter, as the investment grade real estate index was down 3.24%. The CoStar investment grade index is therefore showing positive price movement quarter over quarter.
  • Conversely, the Moody’s/REAL Commercial Property Price Index (CPPI) reported a decline of 3.3% for August 2010, while CoStar’s investment grade index reported increases in August and again in September. The Moody’s CPPI August release triggered a number of “doom and gloom” stories in the media, just as CoStar’s commercial repeat sales index reported CRE sales figures heading in a positive direction.
  • Investors, lenders and the media will undoubtedly want to understand why the two indices, which track similar property types, are providing such different views of investment grade real estate pricing.

Only CoStar’s index can also track transactions below $2.5 million

  • CoStar's index is the only repeat-sale index that measures price movements for transactions below $2.5 million. For the investor who wants to see the entire market, not just a segment, being able to track the pricing movements of the entire market is critical. The CoStar index that takes into account property sales below $2.5 million is referred to as the general commercial real estate index.
  • The general commercial real estate index continued its quarter to quarter fluctuations, most recently reversing the negative price trends from the second quarter and turning positive once again in the third quarter.
  • In the third quarter general commercial real estate index increased 2.29% for the quarter with a positive 3.68% increase for the month of September. The general real estate index is down 7.38% from a year ago and down 20.99% from two years ago. However the general commercial real estate index has shown less volatility than the investment grade property index.
  • In the past quarter, of the four major CRE categories, the US multifamily index moved up the most with a positive 8.98% increase, with the office index increasing 6.08%, followed by the retail index increasing 5.56%. The industrial index remained mostly flat with a slight increase of 0.49% for the quarter. The increase in retail property represents a huge reversal of prior trends in that category, but retail property is still down 8.25% from a year ago.
  • Most of the top ten markets moved in the same direction as the property category trends showing the current capital appetite preference for larger markets. The index for the top ten office markets was up 13.37% for the quarter, the index for the top ten multifamily markets was up 7.91% and the index for the top ten retail markets was up 5.61%, but the index for the top ten industrial markets was down 9.17%, suggesting the larger industrial markets are seeing more distress than the smaller industrial markets.
  • By region, the Midwest index was up the most with a 6.27% increase for the quarter led by multifamily and industrial, but showing weakness in the office market prices. The Northeast was up 4.06% for the quarter, led by office and retail, but showing softening in industrial and multifamily. The West was up 3.42% for the quarter, led by multifamily gains, and the South was up 2.24% overall, led by office and retail gains.
  • Sales transaction dollar volumes used to calculate our September indices were up slightly for investment grade and were stable for general commercial real estate.


National Composite Monthly Indices

2010-10 National Composite Monthly Indices 


Comparison Table for Current Release (ending 9/30/2010)

2010-10 Comparison Table Current Release 


COMMENTARY ON DATA 

The CCRSI October report is based on data through the end of September, 2010. In September 574 pair sales were recorded compared to 611 sales pairs from August. Typically we receive additional data that adds a few percent to the numbers from 2 months ago and up to 12% more data from one month ago, so it appears that sales volumes are stable. This volume is up from a year ago in September when we saw 513 sales pairs. The general volume appears down while the investment grade (institution grade below) was up for the month. We revise the figures for the last three months but note that very little revision is necessary for data older than the last month and even for those from the prior month our revisions are usually modest, never yet changing direction. Figures older than 3 months will not be revised.

Overall, there has been an upward trend in pair volume going back to 2009. January 2009 appears to have been the low point in the downturn in terms of pair volume, when 376 transactions were recorded. Since then, pair dollar volume has increased overall and the average deal sizes for both general and investment grade have increased.

Distress continues to be a significant factor in the index results. Since 2007, the ratio of distressed sales to overall sales has gone from around 1% to about 22% currently.


Number of Repeat-Sale Transactions

2010-10 Number Of Repeat Sale Transactions 


Sub-Indices

2010-10 Sub-Indices 


2010-10 Top Ten Metro Areas table 


Release Schedule

2010-10 Release Schedule 


National Property Type Quarterly Indices Through September of 2010

2010-10 National Property Type Quarterly Indices 


U.S. Regional Quarterly Indices Through September of 2010

2010-10 US Regional Quarterly Indices 


Office Top 10 Metros Quarterly Indices

2010-10 Office Top 10 Metros 


Industrial Top 10 Metros Quarterly Indices

2010-10 Industrial Top 10 Metros 


Retail Top 10 Metros Quarterly Indices

2010-10 Retail Top 10 Metros 


Multifamily Top 10 Metros Quarterly Indices

2010-10 Multifamily Top 10 Metros 


U.S. West Property Type Quarterly Indices

2010-10 US West Property Type 


U.S. South Property Type Quarterly Indices

2010-10 US South Property Type 


U.S. Midwest Property Type Quarterly Indices

2010-10 US Midwest Property Type 


U.S. Northeast Property Type Quarterly Indices

2010-10 US Northeast Property Type 


CONTACT:

Media Relations
Chris Macke
Senior Real Estate Strategist
877-739-5192
cmacke@costar.com

Analysis 
Dr. Norm Miller
Vice President of Analytics
858-678-4206
nmiller@costar.com

ABOUT COSTAR GROUP, INC.

CoStar Group, Inc. (Nasdaq:CSGP - News) is the number one provider of information, marketing and analytic services to commercial real estate professionals in the United States as well as the United Kingdom. CoStar's suite of services offers customers access via the Internet to the most comprehensive database of commercial real estate information throughout the U.S. as well as in the United Kingdom and France. Headquartered in Washington, DC, CoStar has approximately 1,500 people working for the company worldwide, including the largest professional research organization in the industry. For more information, visit http://www.costar.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 subject to many risks and uncertainties that could cause actual results to differ materially from these statements. 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 CoStar's Form 10-K for the year ended December 31, 2009, and CoStar's Form 10-Q for the quarter ended June 30, 2010, under the heading "Risk Factors." In addition to these statements, there can be no assurance that interest in second tier and third tier markets and smaller scaled properties is picking up and those transactions are finally able and will continue to find financing and close; that we are approaching the bottom in terms of sales transactions or when we will see the bottom; that distressed sales will continue to increase overall or that they are peaking as a percentage of sales; that the upward trend in sales pair volume will continue; that the trends represented or implied by the indices will continue; and that the CCRSI will be released on the date and updated on the frequency set forth in the release.  All forward-looking statements are based on information available to CoStar on the date hereof, and CoStar assumes no obligation to update such statements.

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