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Latest CoStar CCRSI Analysis: Commercial Real Estate Prices Maintain Positive Momentum In July

Stocks in this article: CSGP

WASHINGTON, Sept. 18, 2013 (GLOBE NEWSWIRE) -- This month's CoStar Commercial Repeat Sale Indices (CCRSI) provide the market's first look at July 2013 commercial real estate pricing. Based on 1,005 repeat sales in July 2013 and more than 125,000 repeat sales since 1996, the CCRSI offers the broadest measure of commercial real estate repeat sales activity.

July 2013 CCRSI National Results Highlights

  • PRICING MAINTAINS POSITIVE TRAJECTORY IN JULY: 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—both advanced in July 2013, although the lower end of the market has seen the strongest momentum in recent months.
  • VALUE-WEIGHTED INDEX GAINS ARE MODERATING: Pricing gains in the value-weighted index, which represents larger, high-quality properties, have been stronger than pricing gains in the equal weighted index over much of the past three years. Over the last few months, however, this segment of the market has lost some momentum. Monthly gains in the value-weighted index have averaged nearly 1% over the last three months, and in July 2013 the index rose just 0.1%. This slowdown in pricing gains likely reflects the fact that pricing for core assets, particularly five-star office properties, Class A apartments and well-leased malls in primary markets, has already reached its prior peak. Meanwhile, pricing gains in the equal weighted index, which is dominated by smaller transactions, has continued to accelerate. The equal-weighted index has risen by a stronger 2.7% per month from May – July 2013, indicating that investors' risk tolerance is growing.
  • GENERAL COMMERCIAL SEGMENT GAINS MOMENTUM AS INVESTMENT ACTIVITY EXPANDS TO SECONDARY MARKETS AND PROPERTY TYPES: Within the equal-weighted U.S. Composite Index, the General Commercial segment, which includes lower tier properties, has achieved the strongest monthly and quarterly gain of all the major CCRSI indices. Year-to-date, the General Commercial Index has advanced by 11.9% while its Investment Grade counterpart has advanced by 5.7%.
  • LIQUIDITY INDICATORS CONTINUE TO IMPROVE: Transaction volume over the three-month period from May – July 2013 is up 20% from the same period a year ago. Along with the increase in sales volume, other liquidity measures point to a more accommodating market for real estate transactions. Average time on market for properties listed for-sale fell 5.4% in July from its cyclical peak one year ago. The gap between initial asking and final sales price has also improved, narrowing by 3.5 percentage points as of July 2013 after reaching a high of 15.5% in 2010. Meanwhile, the number of properties withdrawn from the market in July 2013 declined 5.8% from the prior year. While we are not yet back to pre-recession levels in terms of liquidity, the improvement seen in these indicators bodes well for a sustained recovery in pricing.
  • DISTRESS SALES FALLING RAPIDLY: Another positive sign for liquidity is the reduction in distress sales. While levels have been generally declining for the last two years, the share of distress volume fell into the single digits in July 2013 for the first time since December 2008. The bulk of these distressed sales occurred in a handful of housing bust markets, indicating that distress is even lower in the majority of metro areas across the U.S.
  1 Month 1 Quarter  1 Year  Trough to 
   Earlier Earlier Earlier Current
Value-Weighted U.S. Composite Index 0.1% 3.3% 9.0% 45.2% 1
Equal-Weighted U.S. Composite Index 2.1% 8.2% 13.6% 17.6% 2
 U.S. Investment Grade Index 1.4% 6.0% 17.6% 30.4% 3
 U.S. General Commercial Index 2.3% 8.5% 12.7% 16.0% 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 July of 2013 [1]

    1 Month 1 Quarter  1 Year 
  Current  Earlier Earlier Earlier
Days on Market 418 420 424 443
Sale Price-to-Asking Price Ratio 88.0% 87.7% 87.3% 85.5%
 Withdrawal Rate 40.8% 42.3% 42.1% 45.1%
[1] Average days on market and sale price-to-asking price ratio are both calculated based on listings that are closed and confirmed by 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/22035.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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