CoStar Commercial Repeat-Sale Indices, February 2011 Release
(With Data through December 2010)
Print Release (pdf)
- Commercial real estate in the Northeast region of the United States leads the nation in terms of strengthening pricing having recovered 23% of its pre-recession pricing levels. The Southeast region of the country is the only other region that has recovered a portion of it pre-recession pricing levels gaining back 14%.
- Overall, pricing for commercial real estate in the Northeast remains 15% lower than its pre-recession pricing levels. The West, Midwest and Southeast regions remain down 38%, 39% and 28% respectively.
- The Northeast region of the United States benefits from the disproportionate impact of commercial property sales in New York City and Boston, two desirable core markets that have continued to attract investor interest, generally stronger economic conditions and superior multifamily pricing performance.
- At the national level, CoStar’s Investment Grade Repeat-Sale Index was up nearly 7% for the month of December continuing the see-saw pattern observed with oscillating monthly pricing data, resulting in a slight positive quarter. While still below of the pricing index from two years ago by 20%, the investment grade property index finished 2010 with a strong positive 8% climb for the year. From its peak in July 2007, the Investment Grade pricing index is down 34.1%, with the trough occurring in January 2010 when the Index was down 40%.
- CoStar’s General Grade Repeat Sales Index continues to search for a bottom as it slipped just under 1% for the month of December. The pricing index for General Grade commercial real estate lost 8.2% for the quarter and 11% for the year, and declined nearly 23% in the past two years.
- The strong performance of the Investment Grade index was enough to lift the U.S. national Composite Index, which is an equal-weighted repeat sales analysis of all commercial real estate sales, with two thirds of the transaction count contained within the General Index. The Composite Index was up 1.8% for the month, down 5.8% for the quarter and down 6.3% for the year. Overall the Composite Index is down 22% over the past two years.
- For the full quarter ending in December 2010, we saw declines across all property type indices when using the composite that includes all property sizes with industrial and retail down nearly 10%, office off 7% and multifamily off nearly 2%. Multifamily was the only composite index that was up for the year with a 3% gain. When analyzed separately by general and investment grade we see higher priced quality properties moving strongly in a positive direction.
- By property type, pricing for commercial property sales in the top ten largest markets is recovering much stronger than the general market with the exception of retail.
- In the West region, all property types are down in recent quarters except for Retail, which is stabilizing. In the South, only Multifamily pricing is up significantly. In the Midwest all property types are down especially office. In the Northeast, average pricing for Multifamily is up strongly with Industrial and Office pricing stabilizing.
National Composite Monthly Indices
Comparison Table for Current Release (Ending 12/31/2010)
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.
COMMENTARY ON DATA
The CCRSI January 2011 report is based on data through the end of December, 2010. In December of 2010 983 pair sales were recorded compared to 656 in the prior month, 610 in October and 690 in September. It is typical to see volume increase at year end. In December of 2009 the pair sales count was 807, so volume on this basis is up 22% from a year earlier. Distress sales as a percent of the total has been increasing in each of the four quarters in 2010 with just over 20% in the 4th quarter with 18.5% for all of 2010. By property type the highest percent of distress in the fourth quarter were for Hospitality at 36%, followed by Multifamily at 24%, office at 21% and industrial and retail both near 19%. We cannot say that distress has peaked out yet and this definitely affects the indices provided here.
Overall, there has been a significant upward trend in pair volume going back to 2009. January 2009 appears to have been the low point in the downturn in terms of pair volume, when 376 transactions were recorded. Since then, pair dollar volume has increased overall and the average deal sizes for both general and investment grade have increased.
We provide one graph below showing the sales counts and a second showing dollar volume. Note that by transaction count the general sales accounted for 70% of the total sales transaction count in November and 66% in December. By volume in December the investment grade properties represented 85% of total volume. The average deal size within investment grade was nearly $16 million US Dollars in December compared to $11.1 million dollars in November and $11.8 million in October. The average dollar size for the general index was $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
Dr. Norm Miller
Vice President of Analytics
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 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 http://www.costar.com.