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Latest CoStar CCRSI Analysis: Commercial Real Estate Pricing Levels Off In January Following Year-End Surge

WASHINGTON, March 13, 2013 (GLOBE NEWSWIRE) -- This month's CoStar Commercial Repeat Sale Indices (CCRSI) provide the market's first look at January 2013 commercial real estate pricing. Based on 703 repeat sales in January 2013 and more than 100,000 repeat sales since 1996, the CCRSI offers the broadest measure of commercial real estate repeat sales activity.

January 2013 CCRSI National Results Highlights

  • COMPOSITE PRICE INDICES WERE MIXED IN JANUARY: The U.S. Value-Weighted Composite Index, which weights each repeat-sale by transaction size or value (and therefore is heavily influenced by larger transactions), ticked up by 0.7% in January, and has now increased 38% from its trough in 2010. The U.S. Equal-Weighted Composite Index, which weights each repeat-sale by transaction equally (and therefore is heavily influenced by numerous smaller transactions), began 2013 with a 2.9% monthly loss, largely due to a seasonal slowdown in trading activities after the year-end sales surge. However, thanks to its steady recovery throughout 2012, the equal-weighted index has increased 5.5% since January 2012.  
  • BROAD MARKET REMAINS ON UPWARD PRICING TRAJECTORY DESPITE SEASONAL FLUCTUATION: Within the U.S. Equal-Weighted Composite Index, the Investment Grade segment gave back a portion of last year's pricing gains and contracted by 1.7% in January 2013. A similar seasonal adjustment in pricing levels has been observed in the first months of the past several years. Despite January's weaker performance, the Investment Grade Index remains slightly up from a year ago and has accumulated gains of more than 16% from its trough in 2009. The General Commercial Index also posted moderate losses in January 2013 but the segment is up 6.4% over January 2012, the best annual performance of the major price indices, reflecting an extension of the real estate market recovery to non-core markets and property types.  
  • LIQUIDITY INDICATORS ARE IMPROVING: Average time on market among for-sale properties declined 2.7% from its recent peak in the second quarter of 2012. Similarly, the gap between initial asking and final sales price has narrowed by almost 2.5% from year-ago levels and is now at the lowest level it has been since early 2009. Supported by a 40% annual increase in CRE lending activities in 2012, the disconnect between seller and buyer expectations is narrowing. Additionally, fewer properties are being withdrawn from the market by discouraged sellers, another indication of improving investor sentiment. The number of properties withdrawn from the market in January 2013 declined 12.1% from the same period in 2012.  The improving liquidity reflected in these indicators is expected to continue to support asset price appreciation.  
  • DISTRESS CONTINUES TO MODERATE: Distressed sales as a percentage of total transactions have been following a declining trend since the start of 2011. Although this percentage ticked up in January 2013 due to the seasonal slowdown in total transactions, the number of repeat sales involving distress assets was the lowest in January 2013 since the summer of 2009.  
  • TRANSACTION VOLUME EDGES DOWN FROM PREVIOUS YEAR-END HIGHS: January 2013 sales volume declined as expected as the flurry of year-end 2012 deal making subsided. Repeat sale transaction volume totaled $3.1 billion in January 2013, approximately one-third of the previous month's volume. In addition to the seasonal slowdown in sales, looming tax rate changes likely pulled some transaction activity forward into 2012.

Monthly CCRSI Results, Data through January of 2013

  1 Month Earlier 1 Quarter Earlier 1 Year Earlier Trough to Current
Value-Weighted U.S. Composite Index 0.7% 1.1% 4.8% 38.5% 1
Equal-Weighted U.S. Composite Index -2.9% -0.6% 5.5% 9.0% 2
 U.S. Investment Grade Index -1.7% -2.8% 1.0% 16.1% 3
 U.S. General Commercial Index -3.2% -0.2% 6.4% 8.3% 4
1 Trough Date: January, 2010  2 Trough Date: March, 2011  3 Trough Date: October, 2009    4 Trough Date: March, 2011

Monthly Liquidity Indicators, Data through January of 2013 1

  Current 1 Month Earlier 1 Quarter Earlier 1 Year Earlier
Days on Market 422 420 421 430
Sale Price-to-Asking Price Ratio 86.9% 86.8% 86.2% 84.8%
 Withdrawal Rate 40.0% 40.9% 41.8% 52.2%

1 Average days on market and sale price-to-asking price ratio are both calculated based on listings that are closed and confirmed by the CoStar research team. Withdrawal rate is the ratio of listings that are withdrawn from the market by the seller relative to all listings for a given month.

Several charts accompanying this release are available at http://media.globenewswire.com/cache/9473/file/18542.pdf .

About the CoStar Commercial Repeat-Sale Indices

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 (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).

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