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TheStreet Open House

Latest CoStar Commercial Repeat Sale Analysis: Commercial Real Estate Prices Steadily Advance In Second Quarter

WASHINGTON, Aug. 13, 2014 (GLOBE NEWSWIRE) -- This month's CoStar Commercial Repeat Sale Indices (CCRSI) provide the market's first look at June 2014 commercial real estate pricing. Based on 1,432 repeat sales in June 2014 and more than 125,000 repeat sales since 1996, the CCRSI offers the broadest measure of commercial real estate repeat sales activity.

June 2014 CCRSI National Highlights

  • CCRSI COMPOSITE PRICE INDICES ADVANCED STEADILY IN SECOND QUARTER. Despite a modest pull-back in June 2014, CCRSI's value-weighted U.S. Composite Index advanced 2.3% in the second quarter of 2014, and 9.7% for the 12-month period ending in June 2014. Reflecting the impact of larger, core-like property sales, the value-weighted U.S. Composite Index is now in line with its prerecession highs reached in 2007. The equal-weighted U.S. Composite Index, which tracks smaller, more numerous property trades typical of those in secondary markets, is now beginning to catch up with its value-weighted counterpart. It advanced 2.4% in the second quarter and 10% for the 12 months ending in June 2014.
  • PRICE GAINS DISTRIBUTED ACROSS HIGH AND LOW ENDS OF THE MARKET. Within the equal-weighted U.S. Composite Index, both the Investment Grade and General Commercial segments increased by 2.4% in the second quarter of 2014, and by 9% and 10.3%, respectively, for the 12 months ending in June 2014. The Investment Grade segment, which is weighted toward high-value properties, has now advanced 41% from its trough in 2009. The General Commercial segment, which is weighted toward smaller, lower-value properties, did not begin its recovery until nearly two years later but has gained 24.1% from its 2011 cyclical low.
  • INDUSTRIAL AND RETAIL LEAD MAJOR PROPERTY TYPES IN ANNUAL PRICING GAINS. All commercial property sectors saw pricing increase over the second quarter and 12 months ending June 2014, demonstrating the breadth of the recovery in CRE prices. Pricing growth was led by the U.S. Industrial Index which advanced 11.5% for the 12 months ending in June 2014, followed closely by the U.S. Retail index, which increased 10.5% in that period. Pricing trends broadly match improved market fundamentals for these two sectors.
  • HIGH CONCENTRATION OF CORE, GATEWAY MARKETS BOLSTERS PRICE GAINS IN NORTHEAST AND WEST REGIONS. Strong investor interest in such core markets as New York, Boston, Los Angeles and San Francisco supported exceptional price growth for commercial property in the Northeast and West regions. Several CCRSI indices, including the Northeast Multifamily, Northeast Retail, and West Multifamily, surpassed their prior peak pricing levels. Overall, the Northeast and West Composite Indices have recovered to within 7% and 17% of their prerecession peak levels, respectively. Meanwhile, investor interest is turning to the South and Midwest, where prices remain more than 20% below peak levels reached in the last cycle.
  • PROPERTY SALES ACTIVITY ESCALATES. Boosted by a strong second quarter, repeat sale transaction volume reached nearly $39.3 billion in the first half of 2014 1, an increase of 14.5% from the first half of 2013, and roughly on a par with the first half-year totals reached in 2006-07. Repeat-sale pair volume increased 8.8% in the Investment Grade segment and 27.2% in the General Commercial in the first half of 2014 over the same period one year earlier. Meanwhile, only 8.7% of properties are selling at distressed pricing as of the second quarter of 2014 — the lowest distress sales rate since the fourth quarter of 2008.

Monthly CCRSI Results, Data through June of 2014

  1 Month Earlier 1 Quarter Earlier 1 Year Earlier Trough to Current
Value-Weighted U.S. Composite Index -0.7% 2.3% 9.7% 59.0% 1
Equal-Weighted U.S. Composite Index 1.4% 2.4% 10.0% 26.0% 2
 U.S. Investment Grade Index 2.2% 2.4% 9.0% 41.0% 3
 U.S. General Commercial Index 1.0% 2.4% 10.3% 24.1% 4
1 Trough Date: January, 2010  2 Trough Date: March, 2011  3 Trough Date: October, 2009    4 Trough Date: March, 2011

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