Jan 12, 2011

Troubled And Trophy Assets Create Volatile Commercial Real Estate Pricing

CoStar Commercial Repeat-Sale Indices, January 2011 Release (With Data through November 2010)

CoStar Commercial Repeat-Sale Indices, January 2011 Release
(With Data through November 2010)


Print Release (pdf)


  • CoStar’s three national commercial real estate repeat sales indices were down for the month of November despite notable price increases for high-profile core transactions in Washington D.C. and New York City.
  • The Investment Grade index was down 4.1% for the month giving back some, but not all of the 8.1% net gains observed over August, September and October. Notwithstanding November’s decline, the Investment Grade index is still up 7.6% since its cyclical low earlier this year.
  • While price declines for non-investment grade real estate decelerated, the General Real Estate Index still fell 1.8% for the month. November’s decline puts the index 3.9% below its level 3 months prior, and 11.7% below year-ago levels. It is now at its lowest point since 2004 as smaller and mid-sized regional banks, which normally make up the bulk of lending for smaller, local real estate, continue to struggle with distressed inventory and have yet to significantly open their lending spigots.
  • Quarterly market-level indices suggest large gains over the past several quarters in Washington D.C. and moderate gains in the most recent New York data. These markets have been the exception rather than the rule.

Negative national trends contrast with the strong and increasing interest in trophy properties within core markets where prices have continued to climb during 2010. Collectively they show a market that is not just bifurcated but possibly trifurcated, with trophy assets commanding bidding wars, smaller assets languishing, particularly in secondary and tertiary markets; and distressed properties trickling onto the market as banks recycle assets at a relatively measured pace.


National Composite Monthly Indices

2010-12 National Composite Monthly Indices 


Comparison Table for Current Release (Ending 11/30/2010)


2010-12 Comparison Table Current Release 

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 sales methodology, widely considered as the most accurate way to measure price changes for real estate. The repeat sales 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.


The CCRSI January 2011 report is based on data through the end of November 2010. In November of 2010, 605 pair sales were recorded compared to 596 in the prior month and 685 in September. Several of the late recorded sales were distressed sales forcing the indices down from the prior two months. Investment pair counts have been increasing modestly while the general pair count has been steady. Investment volume for November continues steady when compared to October and general pair volume is up significantly.

We provide two graphs below, the first showing the sales counts and the second showing the sale volume weighted by the dollar size of the deals. Note that by transaction count the general sales accounted for 65% of the volume in October, while by dollar volume the general sales accounted for 23% of the total sales in October. We saw a spike in September sales volume, which was nearly double the sales volume observed in October. The average deal size within investment grade was over $23 million in September compared to $8.4 million in October and $11.7 million for the year to date.

Distress continues to be a significant factor in the index results with about one fifth of all sales transactions being distress sales.


Number of Repeat-Sale Transactions by Count

2010-12 Number Of Repeat-Sale Transactions by Count 


Number of Repeat-Sale Transactions by Volume

2010-12 Number Of Repeat-Sale Transactions by Volume 



2010-11 Sub-Indices 


2010-11 Top Ten Metro Areas table 



National Property Type Quarterly Indices Through September of 2010

2010-11 National Property Type Quarterly Indices 


U.S. Regional Quarterly Indices Through September of 2010

2010-11 US Regional Quarterly Indices 


Office Top 10 Metros Quarterly Indices

2010-11 Office Top 10 Metros 


Industrial Top 10 Metros Quarterly Indices

2010-11 Industrial Top 10 Metros 


Retail Top 10 Metros Quarterly Indices

2010-11 Retail Top 10 Metros 


Multifamily Top 10 Metros Quarterly Indices

2010-11 Multifamily Top 10 Metros 


U.S. West Property Type Quarterly Indices

2010-11 US West Property Type 


U.S. South Property Type Quarterly Indices

2010-11 US South Property Type 


U.S. Midwest Property Type Quarterly Indices

2010-11 US Midwest Property Type 


U.S. Northeast Property Type Quarterly Indices

2010-11 US Northeast Property Type 



Media Relations
Chris Macke
Senior Real Estate Strategist

Dr. Norm Miller
Vice President of Analytics


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 ofcommercial 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

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 September 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.