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Latest CoStar CCRSI Analysis: Pricing Recovery For Commercial Property Continues In February Despite Seasonal Volatility

WASHINGTON, April 17, 2013 (GLOBE NEWSWIRE) -- This month's CoStar Commercial Repeat Sale Indices (CCRSI) provide the market's first look at February 2013 commercial real estate pricing. Based on 722 repeat sales in February 2013 and more than 100,000 repeat sales since 1996, the CCRSI offers the broadest measure of commercial real estate repeat sales activity.

February 2013 CCRSI National Results Highlights

  • PRICING RECOVERY CONTINUES DESPITE SEASONAL VOLATILITY: The two broadest measures of aggregate pricing for commercial properties within the CCRSI—the value-weighted U.S. Composite Index and the equal-weighted U.S. Composite Index—dipped by 0.7% and 1.4%, respectively, in the month of February 2013, reflecting a continuation of a seasonal pattern first observed in January, in which commercial real estate prices gave back some of the pricing gains from the surge in sales activity at the close of 2012. Despite the recent seasonal dip in activity, commercial real estate prices are still up significantly from year ago levels. The equal-weighted index increased 6.0% since February 2012, while value-weighted index expanded by 5.1% during the same period.  
  • INVESTMENT GRADE SEGMENT TURNED IN STRONGEST PERFORMANCE: Within the equal-weighted version of the U.S. Composite Index, which weights each repeat-sale equally and therefore reflects the influence of smaller transactions, the Investment Grade segment was the first to shake off the seasonal slump of the previous months and increased 1.9% in February 2013. Following a spike in the investment grade pricing last year, the index gave back some of those earlier gains. However, with the February 2013 pricing gains, the Investment Grade segment has now recovered by 17.9% since prices reached a trough in October 2009. Pricing in the General Commercial segment has taken longer to recover, but it is now up nearly 6% from its recent nadir in the first quarter of 2011 as real estate investment activity has increasingly fanned out into more secondary markets and property types.  
  • ABSORPTION POSTS SOLID GAINS IN THE FIRST QUARTER: The relative performance of the General Commercial and Investment Grade indices is tied to market fundamentals. Net absorption of available space for the three major property types – office, retail, and industrial – has been positive over the past three years. However, for the majority of that period, absorption has been stronger among properties in the Investment Grade segment as reflected by the faster pricing growth in this index since 2009. More recently though, the General Commercial segment has posted more robust gains in absorption as well, indicating a broader and more sustained commercial real estate recovery.  
  • TRANSACTION VOLUME RETURNS TO MORE TYPICAL LEVELS: Following an impressive end-year spike in December 2012 when repeat sale transaction volume reached a new record high, transaction volume of $2.9 billion for the month of February 2013 was in line with first quarter average monthly totals over the previous two years.  
  • DISTRESS SALES DECLINE WITH IMPROVING FUNDAMENTALS: The percentage of commercial property selling at distressed prices dropped to 15.9% in February 2013 from over 18% for the previous month.

Monthly CCRSI Results, Data through February 2013

  1 Month Earlier 1 Quarter Earlier 1 Year Earlier Trough to Current
Value-Weighted U.S. Composite Index -0.7% -0.3% 5.1% 36.7% 1
Equal-Weighted U.S. Composite Index -1.4% -3.1% 6.0% 7.1% 2
 U.S. Investment Grade Index 1.9% 0.6% 8.6% 17.9% 3
 U.S. General Commercial Index -1.8% -3.7% 5.7% 6.0% 4
1 Trough Date: January, 2010  2 Trough Date: March, 2011  3 Trough Date: October, 2009    4 Trough Date: March, 2011

Monthly Fundamentals, Data through March of 2013

  Net Absorption (in millions of square feet)
    2011   2012 2013Q1
Aggregate 292.7 315.0 87.8
Investment Grade 207.1 226.5 56.9
General Commercial  85.6 88.6 30.9
Note: "Net Absorption" is the change in occupied space, calculated based on three types of properties: office, retail, and industrial.

 Several charts accompanying this release are available at http://media.globenewswire.com/cache/9473/file/19158.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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