price growth returns in september to ensure positive … · 2019. 12. 27. · the u.s. multifamily...

COSTAR COMMERCIAL REPEAT-SALE INDICES NOVEMBER 2011 Release (With Data through September 2011)

NOVEMBER 2011 CCRSI RELEASE (With Data through September 2011) www.costar.com/ccrsi

PRICE GROWTH RETURNS IN SEPTEMBER TO ENSURE POSITIVE

QUARTER FOR COMMERCIAL REAL ESTATE SALES

INCREASES FOR BOTH INVESTMENT-GRADE AND GENERAL

COMMERCIAL PROPERTY PRICES ACCOMPANIED BY CONTINUED

MULTIFAMILY PRICE RECOVERY AND DECLINING DISTRESS SALES

Resuming an upward trend following a pause in August, CoStar’s monthly National Composite Index of

commercial real estate prices gained 0.4% in September resulting in a quarterly increase of 0.9% for the

third quarter of 2011 compared to the second quarter of 2011. Prices advanced because of the continued,

gradual decline in distress sales, and price recovery in retail and multifamily property sales. This month's

CoStar Commercial Repeat Sale Index (CCRSI) provides the market's first look at September 2011

commercial real estate pricing. Based on 825 repeat sales transactions in September 2011 and more

than 100,000 repeat sales transactions since 1996, CCRSI offers the broadest measure of commercial

real estate repeat sales activity.

September 2011 Highlights

The National Composite Index increased by 0.4% in September 2011, accompanied by a monthly

gain of 0.5% in the Investment Grade Index and 0.4% in the General Commercial Index.

The General Commercial Index continued its steady positive trend over five consecutive months to

produce a 1.6% increase during the third quarter over the second quarter of 2011, its second

consecutive quarter of positive price increases. The Investment Grade Index edged down 1.4% on


a quarterly basis, largely the result of the price softening in August. Overall, the National

Composite Index advanced 0.9% in the third quarter of 2011.

The quarterly upward trend in the National Composite Index was supported by the gradual decline

in sales of distressed properties while non-distressed property sales posted solid quarterly price

increases, including a 2.3% quarterly gain for general commercial properties and a 1.9% gain for

all commercial properties.

In another highlight of the quarter, the CCRSI Multifamily Index posted a 2.1% quarterly gain,

which followed the strong 7.3% increase in multifamily pricing in the second of this year. Since

bottoming-out in the second quarter of 2010, the Multifamily Index has increased 12.3% and

outperformed all the other property indices. Pricing for office, retail, and industrial properties, on

the other hand, continued a pattern of oscillating sale prices. The lack of a clear upward trend for

these property types reflects the uneven path the recovery has taken.

Among the CCRSI’s four regional indices, the Northeast recorded the highest quarterly price

increase at 2%. At the end of the third quarter of 2011, the Northeast Index was only 19.8% below

its most recent peak value, having seen the smallest price drop among the four regions during the

Great Recession. By the same measure, pricing for commercial property is 34.8% below peak

value in the South region, 36.4% below peak value in the West, and 40.1% below peak value in

the Midwest.

Despite great uncertainties in current economic conditions, the commercial real estate market

recovery continued, albeit slowly and at a bumpy pace. The steady and solid recovery of the

General Commercial Index also indicated broad interest in commercial real estate among

investors.


Monthly CCRSI Results

CoStar’s Investment Grade Commercial Repeat Sales Index increased by 0.5% in September

2011, and is now 2% above the same period last year and 35.8% below its peak in August 2007.

CoStar’s Composite Commercial Repeat Sales Index increased by 0.4% in September 2011. It is

now 3.2% below the same period last year and 33.9% below its peak in August 2007.

CoStar’s General Grade Commercial Repeat Sales Index increased by 0.4% in September 2011

and is now 4.1% below the same period last year and 33.7% below its peak in August 2007.

Comparison Table for Current Release (ending 9/30/2011)

1 MONTH EARLIER

1 QUARTER EARLIER

1 YEAR EARLIER

PEAK TO CURRENT

National All Property Type Composite 0.4% 0.9% -3.2% -33.9%

National Investment Grade 0.5% -1.4% 2.0% -35.8%

National General Commercial 0.4% 1.6% -4.1% -33.7%

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Composite Index Investment Grade Index General Commercial Index


Quarterly CCRSI Property Type Results

For the quarter ending September 30, 2011, retail and multifamily prices advanced, while office

and industrial prices retreated.

The U.S. Retail Index had the highest gain in prices, increasing by an impressive 5.0% over last

quarter. However, the price level was still 3.9% below the same period last year, and 32.8% below

its peak in the third quarter of 2007.

The U.S. Multifamily Index continued its solid positive trend in the third quarter 2011, growing 2.1%

over the previous quarter, the only property type index with year-over-year positive growth. This

puts the Multifamily Index the closest to its peak values among the four major property types,

29.5% below its peak in the second quarter of 2007.

The U.S. Office Index went down by 5.1% in the third quarter of 2011 after a strong 15.5% gain in

the second quarter of 2011. The office index is currently 38.5% below its peak in the second

quarter of 2008, the biggest decline among all four property types.

Similar to office, the U.S. Industrial Index fell by 3.6% in the third quarter. Prices for industrial

property are currently 9.3% below the same period last year, and 33.1% below their peak in the

first quarter of 2008.

U.S. Property Type Quarterly Indices through September of 2011


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U.S. Office U.S. Industrial U.S. Retail U.S. Multifamily


Quarterly CCRSI Regional Results

Among the four regions, the Northeast performed the best in the third quarter of 2011, followed by

the West, South, and Midwest. All property types in the Northeast except retail showed positive

price movements, accumulating a 2.0% quarterly gain. The Northeast Composite Index was 5.2%

above the same period last year, and 19.4% below its peak in the second quarter of 2007. The

Northeast Office Index had the highest quarterly increase of 2.1%, followed by Multifamily with a

1.3% increase, and Industrial with a 0.1% increase. The Northeast Retail Index declined by 3.34%

in the third quarter of 2011.

The West Composite Index also recorded positive price changes in the third quarter of 2011 and

posted a 1.36% quarterly increase, offsetting price declines over the same period last year. Among

major property types in the region, the Retail Index had the largest gain of 10.1%, followed by

Multifamily with a 0.2% quarterly gain. Office prices, however, declined by 3.7%, wiping out the

pricing gains made since the third quarter of 2010. The West Industrial sector continued its price

decline of the past two years, falling another 1.7% in the third quarter of 2011.

The South Composite Index edged up slightly during the third quarter of 2011, increasing by 0.5%

over the second quarter, but still 2.6% below the same period last year. The price gains were

mainly concentrated in retail and industrial, at 8.9% and 6.7%, respectively. But these positive

price gains were mostly offset by a 6.4% quarterly decline in office pricing.

The Midwest region is still searching for a pricing bottom. With the exception of office property,

prices for all property types in the Midwest continued to fall with the Midwest Composite Index

declining by another 0.8% in the third quarter of 2011. The index is currently 9.8% below the same

period last year, and 40.4% below its peak in the second quarter of 2007, the largest decline

among all U.S. regions.

U.S. Regional Quarterly Indices through September of 2011


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South Composite Northeast Composite Midwest Composite West Composite


U.S. West Property Type Quarterly Indices through September of 2011

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West Office West Industrial West Retail West Multifamily


U.S. South Property Type Quarterly Indices through September of 2011

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South Office South Industrial South Retail South Multifamily


U.S. Midwest Property Type Quarterly Indices through September of 2011

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Midwest Office Midwest Industrial Midwest Retail Midwest Multifamily


U.S. Northeast Property Type Quarterly Indices through September of 2011

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Northeast Office Northeast Industrial Northeast Retail Northeast Multifamily


Quarterly CCRSI Top 10 Markets Results

Multifamily and Retail Top 10 indices outpaced the national average for the third quarter of 2011,

while the Office and Industrial Top 10 indices underperformed the national average.

In the third quarter of 2011, the Retail Top 10 Index recorded the highest quarterly return, 10.4%,

almost double the National Retail Index quarterly return.

The Multifamily Top 10 Metro Index went up by 3.5%, more than 1% above the National

Multifamily Index quarterly return.

In the third quarter of 2011, both Office and Industrial Top 10 Metro indices declined, by 12.1%

and 9.45%, respectively, slightly more than the National Office and Industrial indices.

At quarter’s end, Office, Retail, Industrial, and Multifamily Top 10 Metro indices remain down

38.0%, 30.9%, 38.1%, and 19.9%, respectively, from their peaks.

Office Top 10 Metros Quarterly Indices through September of 2011

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U.S. Office Top 10 Office Metros


Industrial Top 10 Metros Quarterly Indices through September of 2011

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Top 10 Industrial Metros U.S. Industrial


Retail Top 10 Metros Quarterly Indices through September of 2011

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Top 10 Retail Metros U.S. Retail


Multifamily Top 10 Metros Quarterly Indices through September of 2011

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Top 10 Multifamily Metros U.S. Multifamily


COMMENTARY ON DATA

The CCRSI November 2011 report is based on data through the end of September 2011. With a

total of 825 sales pairs for the month, the transaction activity slightly declined from the previous

month but remained at a level comparable to the period of 2004-2008. At the low point in the last

downturn, a total of only 385 transactions were recorded in January 2009. Of the total 825 sales

pairs, 682 were General Commercial property sales and 143 were Investment Grade.

Total transaction dollar volume declined slightly by 1.2% from its six-month average. The decline in

dollar volume was concentrated in the General Commercial index, where the volume fell by 5.9%

from its six-month average. The Investment Grade transaction volume stayed at par with its six-

month average.

Distress sales as a percentage of total sales continued to decline from a peak of 35.4% in March

2011, and accounted for 25.0% (206 sale pairs) of all repeat-sale transactions in September 2011.

Even though distress sales gradually declined over the past six months, the overall level was still

high, suggesting that distress continues to be a significant factor in CRE pricing.

We provide three graphs below showing the sales counts, dollar volume, and distress sales as a

percentage of total sales. Note that by transaction count, General Grade sales pairs accounted for

83% of the total sales transactions, a ratio that has been stable in the last 12 months.

0

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General Commercial Pair Volume Investment Grade Pair volume

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Investment Grade General Commercial


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, national Investment Grade Index and national General Commercial Index, which

we report monthly, we report quarterly on 28 sub-indices in the CoStar index family. The sub-

indices include breakdowns by property sector (office, industrial, retail, and multifamily), 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 10 largest metropolitan

areas in the country).

The CoStar indices are constructed using a repeat-sales methodology, widely considered the most

accurate measure of price changes for real estate. This methodology measures the movement in

the prices of commercial properties by collecting data on actual transaction prices. When a property

is sold more than one time, a sale pair is created. The prices from the first and second sale are then

used to calculate price movement for the property. The aggregated price changes from all of the

sale pairs are used to create a price index.

National Composite CRE Price

Index

National Indices

by Product

Type

Regional Indices

Regional Indices by

Property Type

Top Ten Metro Market

Indices by Property

Type

General Commercial

Office Northeast

Northeast: Office,

Multifamily, Industrial, Retail

Office

All Retail Midwest

Midwest: Office,


Multifamily

Investment Grade

Industrial South

South: Office,


Industrial

Multifamily West

West: Office,


Retail

Largest Office Metro Areas

Largest Industrial Metro Areas

# CBSA

# CBSA

1 New York

1 Los Angeles

2 Los Angeles

2 New York

3 Washington

3 Chicago


4 Chicago

4 Dallas-Fort Worth

5 Dallas-Fort Worth

5 Atlanta

6 Boston

6 Detroit

7 San Francisco

7 Riverside

8 Atlanta

8 Houston

9 Philadelphia

9 Philadelphia

10 Houston

10 Miami-Fort Lauderdale

Largest Retail Metro Areas

Largest Multifamily Metro Areas

# CBSA

# CBSA

1 New York

1 New York

2 Los Angeles

2 Los Angeles

3 Chicago

3 Chicago

4 Dallas-Fort Worth

4 Dallas-Fort Worth

5 Miami-Fort Lauderdale

5 Washington

6 Atlanta

6 Houston

7 Houston

7 Boston

8 Philadelphia

8 Atlanta

9 Washington

9 Seattle

10 San Francisco

10 Philadelphia

CONTACT: For more information about CCRSI Indices, including our legal notices and disclaimer, please visit http://www.costar.com/ccrsi. ABOUT COSTAR GROUP, INC.

CoStar Group (Nasdaq:CSGP) is commercial real estate's leading provider of information and

analytic services. Founded in 1987, CoStar conducts expansive, ongoing research to produce and

maintain the largest and most comprehensive database of commercial real estate information. Our

suite of online services enables clients to analyze, interpret and gain unmatched insight on

commercial property values, market conditions and current availabilities. Headquartered in

Washington, D.C., CoStar maintains offices throughout the U.S. and in Europe with a staff of

approximately 1,500 worldwide, including the industry's largest professional research organization.

For more information, visit http://www.costar.com.

http://www.costar.com/ccrsi/index.aspx

http://www.costar.com/


This news release includes "forward-looking statements" including, without limitation, statements

regarding CoStar's expectations, beliefs, intentions or strategies regarding the future. These statements

are subject to many risks and uncertainties that could cause actual results to differ materially from these

statements. More information about potential factors that could cause actual results to differ materially

from those discussed in the forward-looking statements include, but are not limited to, those stated in

CoStar's filings from time to time with the Securities and Exchange Commission, including CoStar's Form

10-K for the year ended December 31, 2010, and CoStar's Form 10-Q for the quarter ended September

30, 2011, under the heading "Risk Factors." In addition to these statements, there can be no assurance

that the General Commercial Index will continue its steady positive trend; that the steady and solid

recovery of the General Commercial Index is an indication of broad interest in commercial real estate

among investors; that the U.S. Multifamily Index will continue its solid positive trend; that distress sales as

a percentage of total sales will continue to decline; that distress sales will continue to be a significant

factor in CRE pricing; that investor demand and commercial real estate pricing levels will continue at the

levels or with the trends indicated in this release; that January 2009 will turn out to be the low point in the

downturn in terms of pair volume; that the trends represented or implied by the indices will continue; and

that the CCRSI will be released on the date and updated on the frequency set forth in the release.. All

forward-looking statements are based on information available to CoStar on the date hereof, and CoStar

assumes no obligation to update such statements, whether as a result of new information, future events

or otherwise.

price growth returns in september to ensure positive … · 2019. 12. 27. · the u.s. multifamily...

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