CCRSI Price Indices Reflect Strong Year in the CRE Market

CoStar Group has released its year-end Commercial Repeat-Sale Indices (CCRSI), which showed double-digit price growth at the end of 2015 in all regional and property types across the U.S. commercial real estate markets. The CCRSI provides the market's first look at December 2015 commercial real estate pricing, noting that "improving CRE fundamentals, surging investor demand and liquid capital markets propelled the CCRSI composite indices upward in 2015. Demand for core property assets was especially strong." An excerpt from the summary follows:

December transaction activity remained true to its seasonal pattern observed over the last several years, spiking in the final month of the year as investors raced to close transactions prior to year-end. The December composite pair volume of nearly $18 billion was the highest monthly total on record, helping lift total 2015 volume to $128.3 billion, a 26.2% increase from the previous peak reached in 2014.

While pricing in core U.S. markets set records in 2015, investors moving out on the risk spectrum in search of higher yields resulted in equally strong sales activity in non-core markets and property types, as reflected in the equal-weighted U.S. Composite index. Heavily influenced by lower-value properties typical of those in secondary and tertiary markets, the equal-weighted U.S. Composite Index rose 12.6% in 2015 and is now within 3.4% of its previous high water mark.

To review the CCRSI and accompanying graphs, click here. For more news and information visit Blumberg Partners.

Latest CoStar Reports Shows Ideal Conditions for CRE Growth

CoStar has released its Commercial Repeat Sale Indices (CCRSI) for the month, looking at figures for commercial real estate pricing, which reflects continued price growth in Q3. Steady employment growth, low interest rates, and the global uncertainty that has pushed capital into 'safe-haven' investments helped drive continued investment and price growth, with real estate investors continuing to push activity. According to the CCRSI, composite pair sales volume of nearly $91 billion in the first three quarters of 2015 grew 32.8% compared with the first three quarters of 2014, and put 2015 on track to become the strongest year on record for transaction volume.

Some excerpted hilights follow:

STEADY GAINS SEEN IN OFFICE SECTOR.
The core gateway markets continued to do well during the third quarter of 2015. In addition, former housing-bust markets such as Atlanta and Miami, which have so far lagged in the recovery, also saw some of the most pronounced improvements in market fundamentals and price growth in the last year. The national U.S. Office Index increased 2.7% in the third quarter of 2015 and 10.3% in the 12-month period ended September 2015. The Prime Office Metros Index advanced by an even stronger 12% in the 12 months ended September 2015, propelling it to within 1.2% of its prior peak level.

INDUSTRIAL MARKET PRICE GROWTH HIGHER OUTSIDE PRIME METROS.
The industrial sector's solid fundamentals performance has supported price growth of 2.6% in the third quarter of 2015 and 10.9% in the 12 months ended September 2015. The Industrial Index is now within 6.3% of last cycle's peak. The Prime Industrial Metros Index has generally mirrored that of the broader market. Although its 7.7% increase in the 12 months ended September 2015 was lower than the national Industrial Index, and the Prime Industrial Metros Index remained 15% below last cycle's peak. This suggests more room for price appreciation as rents continue to rise, but space markets are expected to become increasingly competitive as construction levels increase.

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Latest CCRSI Shows Property Price Gains

CoStar has released its latest Commercial Repeat Sale Indices (CCRSI), offering a review of commercial real estate pricing for April, which reflected strong property price gains as the price gap narrowed between buyers and sellers. The CCRSI measures the movement in the prices of commercial properties by collecting data on actual transaction prices. Some hilights from the report include:

The general commercial segment remains on an upward trajectory, despite recent price volatility. The equal-weighted U.S. Composite Index's General Commercial segment declined by 1% in April 2014. Despite the volatility in the monthly data, the overriding trend over the past 12 months for this segment has been outsized pricing gains as capital expanded into secondary markets. The 13.2% year-over-year increase in April 2014 was the largest such gain among the four major indices.

Increased investment activity reflects a healthy market for transactions. Repeat sales transaction volume year-to-date through April 2014 increased 25% from the same period in 2013, and is approaching 2006 transactions levels.

The price gap between buyers and sellers continues to narrow. The delta between sale prices and asking prices closed by more than one percentage point in the 12-month period ended in April 2014. This gauge of liquidity varies by region and property type, however. In the West region, sellers are achieving over 90% of asking prices, while in the Midwest this ratio is 82%, the lowest of the four regions. Multifamily properties are driving much of this improvement in liquidity. In the core coastal markets of Los Angeles, San Francisco, Boston and New York, for example, multifamily sale prices relative to asking prices are back to, or above, 2006-07 peak levels.

Other liquidity measures have also improved. The average time on market for for-sale properties fell 3% in the 12 months ending in April 2014, and the share of properties withdrawn from the market by discouraged sellers declined by more than two percentage points during the same period.

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Year-End CCRSI Confirms Broad Recovery in CRE

CoStar released its latest Commercial Repeat Sale Indices (CCRSI) this week analyzing property sales through December 2013, which confirms that the recovery in U.S. commercial real estate markets advanced in 2013 as broad gains in net absorption, rents, sales activity and pricing extended across markets and property types during the year. The CCRSI is based on 1,648 repeat sales in December 2013 and more than 125,000 repeat sales since 1996, and are constructed using a repeat sales methodology. An excerpt from CoStar's summary follows:

The upbeat performance was driven by relatively steady economic growth and job gains of 2.3 million or 1.7% in 2013. During the year, expanding businesses accounted for the highest aggregate net absorption across all four major commercial property types since the recovery began.

The increased demand for space, coupled with continued low construction levels (except for the multifamily property sector, which saw a notable increase in construction), vacancy rates fell across most markets at year-end 2013 from one year earlier, and the national average vacancy rate reached new cyclical lows in both the apartment and industrial sectors over the last year.

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CRE Fundamentals Continuing Recovery

New analysis from the CoStar Commercial Repeat Sales Index (CCRSI) released this month shows that prices in the commercial real estate market have recovered more rapidly than transaction activity, suggesting that investors are focusing on the most attractive deals. According to the data, investment transaction activity has progressed much like the overall economy, showing steady but painfully slow improvement. The data suggests that uneven liquidity remains an important force to be reckoned with among the myriad adverse factors weighing on CRE value recovery, especially for non-institutional-grade properties or assets in non-prime markets.

"For some time now, there’s been a significant imbalance between the amount of capital chasing real estate deals and the available supply of reasonable, institutional-quality deals," said Michael Zietsman, managing director and regional head of the Southwestern Capital Markets Group for Jones Lang LaSalle. "If there were more supply, there would be much larger transaction volume. The primary markets and product types have fully recovered, but investors want high-quality real estate. That’s been our biggest challenge."

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CCRSI Reports Office Property Strongest CRE Pricing Recovery In 2011

The CoStar Commercial Repeat Sale Indices (CCRSI) National Composite Index ended 2011 was released this month, reflecting continuing gains in apartments and growing momentum in the office sector. An excerpt from the report:

Investor interest in office property also rebounded in 2011, with the office property index increasing by 17.3% since the end of March 2011. Like the recovery of the broader economy, the office rally has proved to be volatile and uneven despite the significant firming up of prices.

"Pricing gains have proven to be more explosive in tech-centric markets than in the overall market," according to the CoStar CCRSI report. "The office index will likely continue to vacillate between gains and losses until office demand growth becomes more evenly dispersed across markets."

Industrial property pricing increased by just 4.4% since March 2011, and was down slightly in the fourth quarter compared to year-ago levels.

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CCRSI Shows CRE Price Index Up, Seventh Month in a Row

CoStar released the CoStar Commercial Repeat Sale Index (CCRSI) reflecting that the CoStar National Composite Index of commercial real estate pricing rose for the seventh straight month. In November, the Index increased by 0.6%, with prices for commercial property an average 1.8% higher than compared with the same period a year ago.

Monthly CCRSI Results

CoStar's Composite Commercial Repeat Sales Index increased by 0.6% in November 2011. It is now 1.8% above the same period last year and 31.8% below its peak in August 2007.

CoStar's Investment Grade Repeat Sales Index increased by 2.2% in November 2011 and is now 6.4% above the same period last year and 29.2% below its peak in August 2007.

CoStar's General Grade Commercial Repeat Sales Index increased by 0.3% in November 2011 and is now 1.1% above the same period last year and 32.5% below its peak in August 2007.

"This modest-but-steady recovery largely reflected the impact of improving market fundamentals, which have continued to attract investors and buyers despite a lending environment for smaller properties that has remained constricted," according to the CoStar report.

The CoStar indices are constructed using a repeat sales methodology that measures the movement in the prices of commercial properties by collecting data on actual transaction prices. The CCRSI tracks sale pair transaction data through Nov. 30.

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