PRESS RELEASE DETAIL


Sep 01, 2010

CoStar Commercial Repeat-Sale Indices, September 2010

2010-09-01 2010 CoStar Commercial Repeat-Sale Indices, September 2010

Print Release (pdf)

OBSERVATIONS

  • Investment grade real estate continued to slide in July by a negative 5.05% following a similar dip in June. Cumulatively that is a drop of nearly 10% in just two months, following an extremely positive 11.78% increase in May and nearly wiping out the May increase.
  • As a result, the three month change in the investment grade index ending July 31, 2010 was a slightly positive 1.01%.
  • For comparison purposes we note that the Moody’s REAL Commercial Property Price Indices (CPPI) declined in June by 4.0% not too far off of our investment grade index for June. The Moody’s REAL CPPI for July will come out in a month or so, and it will be interesting to see if it continues to follow the CoStar CCRSI for investment grade.
  • The past 12 month change in the investment grade index was -14.34% which seems huge but is far better than the minus 20% to 33% annual declines witnessed from April of 2009 through April of 2010.
  • On the positive side general commercial real estate and therefore the CoStar composite index for all commercial real estate continued to show improvement with a plus 6.41% for general commercial and plus 5.665 for the composite for the month of July. This suggests interest in second tier and third tier markets and smaller scaled properties is picking up and/or finally able to find some financing and close. The general composite index remains down by nearly 6% from a year ago but again, this is far better than observed during the previous 12 months.
  • Sales transaction dollar volumes picked up for all property types during the second quarter of 2010 with significant increases in the office sector as well as multifamily. Industrial volumes and retail remain low but also showed some increase in activity. Generally an increase in transaction volumes indicates a positive movement in prices, however, a significant proportion of distressed sales will add both volatility and noise to these indices and right now all we can say is that we are approaching a shaky bottom.
  • The most active buyers have been REITs, public and private, followed by developer/owners and individuals as well as investment managers including some hedge funds.
  • Overall distressed sales are still increasing and yet as a percent of sales, as shown below, they appear to be peaking but we should note that overall volumes are also picking up.
  • Distressed sales in the second quarter of 2010, again as a percent of transaction volume, are highest for hospitality at 35%, followed by multifamily at 28%, office at 21%, retail at 18% and industrial at about 17%.
National Composite Monthly Indices

2010-8 National Composite Monthly Indices 

Comparison Table for Current Release

2010-8 Comparison Table Current Release 

COMMENTARY ON DATA 

The CCRSI July report is based on data through the end of June. In June, 665 sales pairs were recorded, up significantly from May, during which 506 transactions occurred. Overall, there has been an upward trend in pair volume going back to 2009. February 2009 appears to have been the low point in the downturn in terms of pair volume, when 374 transactions were recorded. Since then pair volume has increased overall, and beginning in November 2009, year-over-year changes in pair volume have been positive every single month. In terms of the mix of pairs that have sold, June saw an increase in the proportion of repeat investment grade properties trading hands. Investment grade sales amounted to 31% of the total number of sales in June, the highest level it has been going back to January 2008. This indicates an increased mix of larger properties changing hands, which had been at decreased levels since the beginning of the recession. Prior to June, 24% of sales pairs in 2010 were considered investment grade. This compares to an average of 33% of sales pairs being investment grade in 2006 and 2007, before the start of the downturn. Distress is also a factor in the mix of properties being traded. Since 2007, the ratio of distressed sales to overall sales has gone from around 1% to above 23% currently. Hospitality properties are seeing the highest ratio, with 35% of all sales occurring being distressed. Multifamily properties are seeing the next highest level of distress at 28%, followed by office properties at 21%, retail properties at 18%, and industrial properties at 17%.s

Number of Repeat Sale Transactions

2010-8 Number Of Repeat Sale Transactions 

Distressed Transactions as % of All Transactions

2010-8 Distressed Transactions As Percent 

Distressed by Property Type

2010-8 Distressed By Property Type 

Sub-Indices

2010-8 Sub-Indices 

costar-ccrsi-2010-0804-tbl-metro-areas.jpg 

Release Schedule

2010-8 Release Schedule 

National Property Type Quarterly Indices Through June of 2010

2010-8 National Property Type Quarterly Indices 

U.S. Regional Quarterly Indices Through June of 2010

2010-8 US Regional Quarterly Indices 

Office Top 10 Metros Quarterly Indices

2010-8 Office Top 10 Metros 

Industrial Top 10 Metros Quarterly Indices

2010-8 Industrial Top 10 Metros 

Retail Top 10 Metros Quarterly Indices

2010-8 Retail Top 10 Metros 

Multifamily Top 10 Metros Quarterly Indices

2010-8 Multifamily Top 10 Metros 

U.S. West Property Type Quarterly Indices

2010-8 US West Property Type 

U.S. South Property Type Quarterly Indices

2010-8 US South Property Type 

U.S. Midwest Property Type Quarterly Indices

2010-8 US Midwest Property Type 

U.S. Northeast Property Type Quarterly Indices

2010-8 US Northeast Property Type 

CONTACT:

Media Relations
Vikki Kayne - 301-280-3858 - vkayne@costar.com

Analyst 
Dr. Norm Miller - 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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