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Latest CoStar Commercial Repeat-Sale Analysis: Commercial Real Estate Pricing Growth Levels Off In August Amid Uncertainty Over Fed Tapering And Rising Interest Rates

WASHINGTON, Oct. 16, 2013 (GLOBE NEWSWIRE) -- This month's CoStar Commercial Repeat Sale Indices (CCRSI) provide the market's first look at August 2013 commercial real estate pricing. Based on 1,261 repeat sales in August 2013 and more than 125,000 repeat sales since 1996, the CCRSI offers the broadest measure of commercial real estate repeat sales activity.

August 2013 CCRSI National Results Highlights

  • PRICING GROWTH FOR COMMERCIAL PROPERTY SLOWED IN AUGUST AMID ANXIETY OVER FED'S TAPERING OF BOND PURCHASES AND RISE IN INTEREST RATES: The two broadest measures of aggregate pricing for commercial properties within the CCRSI—the value-weighted and the equal-weighted versions of the U.S. Composite Index—saw mixed movements for the month. The equal-weighted index, which reflects the pricing impact of more numerous smaller transactions, edged downward by 1.1% in August, while the value-weighted index, which is influenced by larger transactions, expanded by 1.6% during the same time period. On an annual basis, both indices advanced by nearly 10%. Despite investor reassurance following the Fed's decision in September to delay the tapering of its quantitative easing policies, further economic uncertainty, largely stemming from the U.S. government shutdown and debt ceiling debate, may lead to further volatility in pricing in the near term.
  • POSITIVE ABSORPTION IN BOTH INVESTMENT GRADE AND GENERAL COMMERCIAL SEGMENTS SUPPORTS BROAD PRICING RECOVERY: Net absorption of available space across the three major commercial property types – office, retail and warehouse – continues to improve. For the first three quarters of 2013 net absorption among these three property types totaled more than 240 million square feet, the highest level for the first three quarters of a year since 2008. Core CBD office markets, including New York, San Francisco and Houston, and large distribution markets such as Dallas and Chicago, have led absorption 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 made strong gains in absorption as well, indicating a broader and more sustained commercial real estate recovery. In the office market, for example, nearly 90% of total net absorption over the last year was in suburban submarkets. Pricing in the General Commercial Index rose by 3.7% in the last quarter, compared with growth of 0.1% in the Investment Grade Index.
  • TRANSACTION VOLUME REMAINS STEADY: The number of repeat sale transactions through August 2013 increased 15% from the same period one year ago, while the value of those transactions increased 17%. The percentage of commercial property selling at distressed prices remains near a four-and-a-half year low.

Monthly CCRSI Results, Data through August of 2013

  1 Month Earlier 1 Quarter Earlier 1 Year Earlier Trough to Current
Value-Weighted U.S. Composite Index 1.6% 2.4% 9.0% 47.5% 1
Equal-Weighted U.S. Composite Index -1.1% 3.0% 10.0% 15.7% 2
U.S. Investment Grade Index -1.0% 0.1% 10.8% 28.2% 3
U.S. General Commercial Index -1.2% 3.7% 9.8% 14.1% 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 September of 2013

  Net Absorption (in millions of square feet)
  2011 2012 2013Q1 2013Q2 2013Q3
Aggregate 286.5 296.8 87.7 92.5 60.6
Investment Grade 206.4 216.3 59.8 59.2 49.6
General Commercial 80.1 80.4 27.9 33.3 11.0
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/22619.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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