Jan 14, 2015
CRE Price Recovery Continues With Strong Showing in November
Healthy Demand for CRE Buoys Net Absorption and Price Gains
Healthy Demand for CRE Buoys Net Absorption and Price Gains
CCRSI RELEASE – January 2015
(With data through November 2014)
This month's CoStar Commercial Repeat Sale Indices (CCRSI) provides the market's first look at November 2014 commercial real estate pricing. Based on 1,145 repeat sales in November 2014 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
HEALTHY CRE FUNDAMENTALS SUPPORT BROAD PRICING GAINS IN NOVEMBER 2014. Demand continued to outpace supply across most of the major property types, supporting lower vacancies, rising rents and continued investor interest in CRE. 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% and 0.7%, respectively, in the month of November 2014, contributing to annual gains of 9.9% and 14.8%, respectively, for the 12 months ending in November 2014.
- VALUE-WEIGHTED U.S. COMPOSITE INDEX SET A NEW HIGH-WATER MARK. Investors’ healthy appetite for core properties propelled growth in the value-weighted U.S. Composite Index, which surpassed its pre-recession peak previously set in 2007 by 5.1% in November 2014.
- PRICE GROWTH ACCELERATED IN EQUAL-WEIGHTED INDEX. Price growth in the equal-weighted U.S. Composite Index, influenced more by smaller, non-core deals, accelerated to an annual pace of 14.8% in November 2014, from an average annual pace of 7.5% in 2013.
- ALTHOUGH SLOWER TO ENTER RECOVERY PHASE, THE GENERAL COMMERCIAL INDEX IS BUILDING MOMENTUM. Within the equal-weighted U.S. Composite Index, the Investment Grade segment has led its General Commercial counterpart in the recovery. However, as more investor capital flows to secondary markets and property types, growth in the General Commercial Index has outpaced that of the Investment Grade Index over the last month, quarter and year ended in November 2014.
- DEMAND FOR CRE SPACE GAINED STEAM IN 2014. Net absorption for the three major property types—office, retail, and industrial—climbed to 476 million square feet for the full year of 2014, a 22% increase from 2013. As reflected in recent price gains in lower-tier properties, the rate of net absorption in the General Commercial segment increased by 41% in 2014, compared with an increase of 15% in the Investment Grade segment.
- TRANSACTION VOLUME ON PACE FOR A RECORD HIGH IN 2014. Composite pair volume of $85.6 billion year-to-date through November of 2014 had already surpassed 2013’s annual total by 5%, and stood well above last cycle’s previous high-water mark set in 2007. In an environment of improving fundamentals and rising rents, forced property sales also continued to decline. Just 10% of repeat sale transactions involved distressed assets in the first 11 months of 2014, down from 17% of repeat sale transactions during the same period in 2013.
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.
Mark A. Klionsky, Senior Vice President-Marketing (firstname.lastname@example.org).
For more information about the CCRSI Indices, including the full accompanying data set and research methodology, please visit 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 9.0 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 operates websites with over 17.5 million unique monthly visitors in aggregate during third quarter of 2014. Headquartered in Washington, DC, CoStar maintains offices throughout the U.S., Canada and Europe with a staff of over 2,300 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; 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, 2013, and Quarterly Report on Form 10-Q for the quarter ended September 30, 2014, 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.