CoStar Commercial Repeat-Sale Indices, March 2011 Release
(With Data through January 2011)
Print Release (pdf)
- The Investment Grade Index in the most recent CoStar Commercial Repeat-Sale Indices (CCRSI) is up 10.6% versus the same period last year even after a slight decline in January 2011.
- The Investment Grade pair count (total number of repeat sales) is up 54% year over year, a substantial increase.
- The increase in Investment Grade repeat sales transactions reflects trends in the broader market. CoStar tracked more than $211 billion in total sale transactions in 2010. This is a 79% increase over 2009 sales volume for all sales. While the market is clearly recovering sales transaction volume still remains 63% below the market’s recent peak volume level.
- CoStar’s General Grade Index is down 11.3% versus the same period last year, reflecting continued downward pressure on general commercial property values. It did, however, start 2011 on a slight up-note, increasing 0.4% for the first month of 2011. After being down for the past three months at -2.4% and down -11.3% for the past year, the smaller property index may be seeing the specter of bottom for the first time in the past three years.
- The General Grade pair count is down 1% over the year-ago level. We expect pair counts will increase slightly as additional closings are recorded.
- The Composite Index, which is an equal weighted analysis of both the Investment Grade and General Grade indices and a reflection of the broad overall market, was flat the first month of 2011, down -2.6% for the past three months and down -6.6% for the past 12 months.
National Composite Monthly Indices
Comparison Table for Current Release (Ending 1/31/2011)
The CoStar Commercial Repeat-Sale Indices (CCRSI) are the most comprehensive and accurate measures of commercial real estate prices in the United States. In addition to the national composite index, there are a total of 32 sub-indices in the CoStar index family. The sub-indices include breakdowns by property sector (office, industrial, retail, multifamily 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 10 largest metropolitan areas in the country). The CoStar national composite index is produced on a monthly basis.
The CoStar indices are constructed using a repeat-sale methodology, widely considered as the most accurate way to measure price changes for real estate. The repeat-sale methodology measures the movement in the prices of commercial properties by collecting data on the actual sales prices that occur when a property sells. When a property is sold more than one time, a sale pair is created. The prices from the first and second sale are then used to calculate price movement for the property. By aggregating all the price changes from all of the sale pairs, a price index is created.
COMMENTARY ON DATA
We wish to point out a one-time change in the methodology used effective this month. The quarterly indices and approach has not changed but the monthly numbers are now based on a two-stage/frequency-conversion of rotating quarter procedure, which is slightly less noisy than direct monthly estimates.
The CCRSI March 2011 report is based on data through the end of January 2011. In January of 2011, 483 pair sales were recorded compared to 434 in the same month of 2010. Note that is an increase of 11% compared to the prior year, and we expect to see pair volume running closer to 20% ahead of January 2010 as additional sales from that period are confirmed and added, in line with the 22% higher volume we observed in December of 2010 versus December of 2009.
The Investment Grade pair count is up 54% over last year at this time while the General Grade pair count is down just a single percent. As previously mentioned, the pair counts for both will likely increase slightly when the additional closings are recorded.
Distress sales as a percent of the total increased in each of the four quarters in 2010 with an increase of just over 20% in the fourth quarter and an increase of 18.5% for all of 2010. By property type, the highest percentage of distress in the fourth quarter was found in the Hospitality sector at 36%, followed by Multifamily at 24%, Office at 21% and Industrial and Retail both near 19%. It is clear from our analysis that the amount of distressed commercial property has not peaked and will continue to affect the pricing indices provided here.
We provide one graph below showing the sales counts and a second showing dollar volume. Note that by transaction count the General Grade Index sales accounted for 68% of the total sales transaction count in January. By volume in January properties in the Investment Grade Index represented 78% of total volume. The average deal size within Investment Grade was $10.5 million in January down from nearly $16 million in December and more in line with long-term averages. The average dollar size for the General Grade Index was $1.4 million in January compared to $1.6 million in December.
Number of Repeat-Sale Transactions by Count
Number of Repeat-Sale Transactions by Volume
National Property Type Quarterly Indices Through December of 2010
U.S. Regional Quarterly Indices Through December of 2010
Office Top 10 Metros Quarterly Indices
Industrial Top 10 Metros Quarterly Indices
Retail Top 10 Metros Quarterly Indices
Multifamily Top 10 Metros Quarterly Indices
U.S. West Property Type Quarterly Indices
U.S. South Property Type Quarterly Indices
U.S. Midwest Property Type Quarterly Indices
U.S. Northeast Property Type Quarterly Indices
Senior Real Estate Strategist
ABOUT COSTAR GROUP, INC.
CoStar Group (Nasdaq:CSGP) is commercial real estate's leading provider of information, analytic and marketing services. 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. Headquartered in Washington, DC, CoStar maintains offices throughout the U.S. and in Europe with a staff of approximately 1,500 worldwide, including the industry's largest professional research organization. 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, 2010, under the heading "Risk Factors." In addition to these statements, there can be no assurance that there will be continued downward pressure on general commercial property values; that the smaller property index is seeing the specter of bottom for the first time in the past three years; that pair counts will increase slightly as additional closings are recorded; that pair volume will run closer to 20% ahead of January 2010 as additional sales from that period are confirmed and added; that the amount of distressed commercial property will continue to affect the pricing indices provided in this release and that the trends represented or implied by the indices will continue. All forward-looking statements are based on information available to CoStar on the date hereof, and CoStar assumes no obligation to update such statements.