Troubled And Trophy Assets Create Volatile Commercial Real Estate Pricing

WASHINGTON, Jan. 12, 2011 (GLOBE NEWSWIRE) -- Monthly Pricing Performance Update for U.S. Commercial Real Estate issued in January 2011 Release of Costar Commercial Repeat-Sales Indices ( www.costar.com/ccrsi ) based on sales activity through November 2010.

• 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.