Aug 31, 2016
CRE Price Growth Holds Steady As Economic Expansion Remains Resilient
Healthy Fundamentals and Continued Strong Liquidity Supporting Price Gains Seen In Latest Repeat-Sale Analysis
CCRSI RELEASE – AUGUST 2016
(With data through JULY 2016)
This month's CoStar Commercial Repeat Sale Indices (CCRSI) provides the market's first look at commercial real estate pricing trends through July 2016. Based on 1,258 repeat sale pairs in July 2016 and more than 164,000 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 CONTINUES AT STEADY PACE. Both of CCRSI’s equal- and value-weighted national composite price indices advanced in July 2016 as a combination of healthy market fundamentals, low interest rates and continued availability of investment capital resulted in a healthy environment for CRE price growth. CoStar’s value-weighted U.S. Composite Index, which is influenced by high-value trades, advanced 1.3% in July 2016 and 10.1% in the 12-month period ended in July 2016, propelling it to nearly 25% above its prerecession peak level. The equal-weighted U.S. Composite Index also increased 1.3% in July 2016, contributing to an annual gain of 7.2% for the 12-month period ended in July 2016. Supported by increased investor interest in properties beyond primary markets, the equal-weighted U.S. Composite Index has now advanced to within 1% of its prerecession peak.
GENERAL COMMERCIAL SEGMENT LED GROWTH IN EQUAL-WEIGHTED INDEX. Pricing in the General Commercial segment, which is weighted toward smaller, lower-end properties, has gained momentum from increased capital flows across the property size and quality spectrum. The General Commercial segment increased by 1.4% in July 2016 and 7.5% for the 12 months ended in July 2016, while its Investment-Grade counterpart declined 1.4% for the month, although still up 2.8% for the 12 months ended in July 2016. The General Commercial Index has moved to within 1.1% of its prerecession peak.
TRANSACTION VOLUME REMAINS LOWER THAN LAST YEAR’S RECORD PACE. While transaction activity remains robust, total composite pair volume of $68.9 billion year-to-date through July 2016 was 2.8% lower than the same period one year earlier. The deceleration in trading activity is likely to contribute to more modest price growth in 2016 than the record pace of the last two years.
DESPITE MODEST DECELERATION IN DEAL VOLUME, OTHER MEASURES SHOW PROPERTY MARKETS REMAIN HIGHLY LIQUID. Average time on the market for for-sale properties dropped sharply, declining 20.0% in the 12-month period ended in July 2016. Further, the sale-price-to-asking-price ratio narrowed by 2.5 percentage points in the last 12 months to 95.3% in July 2016, the highest this ratio has been since August 2006. In addition, the share of properties withdrawn from the market by discouraged sellers receded by 4.2 percentage points to 29.3% during the 12-month period ended in July 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 nearly 25 million unique monthly visitors in aggregate in the second quarter of 2016. Headquartered in Washington, DC, CoStar maintains offices throughout the U.S. and in Europe and Canada with a staff of approximately 2,700 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 deceleration in trading activity and its contribution to more modest price growth in 2016; and the risk that transaction activity, time on market, percentage of withdrawn properties, sale-price-to-asking-price ratios, investor demand, market supply, vacancy rates, absorption, liquidity 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 CoStar’s Quarterly Report on Form 10-Q for the period ended June 30, 2016, each of which is filed with the SEC, including in the “Risk Factors” section of those filings, 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.