CoStar Midyear CCRSI Shows Strong Growth in CRE Pricing

CoStar has released its midyear CoStar Commercial Repeat Sale Indices (CCRSI) showing strong growth in commercial real estate as price gains in secondary markets in the US markets eclipsed the top markets as buyers of commercial real estate increasingly expanded investment activity outside the handful of prime markets and core properties during the second quarter. "The leap in [CRE] pricing in the second quarter was seen across all four major property types. Double-digit annual gains in nearly every property sector demonstrate the depth of the recovery," noted Dr. Ruijue Peng of CoStar's Property and Portfolio Research (PPR), author of the CCRSI. An excerpt from the report follows:

The value-weighted U.S. Composite Index, influenced by larger transactions and generally tracking high-quality core real estate transactions, gained 5.9% in the second quarter, its best quarterly showing since 2011. The equal-weighted Composite Index, comprised of smaller, more numerous deals in the lower end of the market, jumped by an even more impressive 9.1% in the second quarter, its strongest three-month gain on record.

Within the Composite Index, the Investment Grade segment, which broadly encompasses upper-middle tier properties, continued moving steadily upwards, increasing 7.9% above the first quarter.

Pricing in the General Commercial segment rose by a very strong 9.2% from the previous quarter and increased 11.7% over the last 12-month period, gaining momentum as investors comb secondary markets and property types in search of better pricing and yields.

In a significant shift, both retail and office pricing growth vaulted past multifamily in the second quarter, reflecting the cyclical slowdown in fundamentals for the apartment market, which has led the recovery for several years.

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