Mar 28, 2018
Price Growth for Commercial Property Remains Strongest at Lower End of Market
Moderating Space Absorption and Transaction Volume Reflect Maturing CRE Cycle
CCRSI RELEASE – MARCH 2018
(With data through FEBRUARY 2018)
This month's CoStar Commercial Repeat Sale Indices (CCRSI) provides the market's first look at commercial real estate pricing trends through February 2018. Based on 781 repeat sale pairs in February 2018 and more than 189,000 repeat sales since 1996, the CCRSI offers the broadest measure of commercial real estate repeat sales activity.
CCRSI National Results Highlights
MOMENTUM IN PRICE GROWTH REMAINS STRONGER AT LOWER END OF MARKET. The equal-weighted U.S. Composite Index, which reflects the more numerous but lower-priced property sales typical of secondary and tertiary markets, advanced by 1.4% in the month of February 2018 and increased 13.2% in the 12-month period ended in February 2018. By comparison, the value-weighted U.S. Composite Index, which reflects larger-asset sales common in core markets, fell 0.5% in the month of February 2018, while posting an annual gain of just 6.2% in the 12 months ended in February 2018.
GENERAL COMMERCIAL SEGMENT CONTINUED TO SHOW STRONGER MOMENTUM WITHIN EQUAL-WEIGHTED INDEX. Recent pricing trends in the composite indices were mirrored in the two sub-indices of the equal-weighted Composite Index. The general commercial segment, which is influenced by smaller, lower-priced properties, increased 14.8% for the 12 months ended in February 2018. Meanwhile, the investment-grade segment of the index, which is influenced by higher-value properties, was up by a more modest 6.8% in the same period.
PACE OF CRE ABSORPTION SLOWING ALONG WITH PRICE INDICES. Demonstrating the overall demand for CRE space, net absorption across the three major property types—office, retail, and industrial—is projected to total nearly 525 million square feet for the 12-month period ended in March 2018. While positive, the total is a nearly 25% decrease from the average pace of the prior three 12-month periods ended in the month of March for the years 2015, 2016 and 2017. This slowdown in leasing activity is expected as the CRE cycle matures and has been most evident in the office sector, where slowing working-age population growth, along with tight labor markets, has begun to dampen the pace of absorption from recent levels.
TRANSACTION VOLUME CONTINUES TO MODERATE. Composite pair volume totaled $130.2 billion in the 12-month period ended in February 2018, a 2.9% decrease from the prior 12-month period ended in February 2017. The slowdown was more noticeable in the investment-grade segment of the market, where transaction volume was down 3.6%, compared to just under 1% in the general commercial segment, in the 12 months ended in February 2018.
About The CoStar Commercial Repeat-Sale Indices
The CoStar Commercial Repeat-Sale Indices (CCRSI) is the most comprehensive and accurate measure 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, and West), by transaction size and quality (general commercial, investment-grade), and by market size (composite index of the prime market 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 once, a sales pair is created. The prices from the first and second sales are then used to calculate price movement for the property. The aggregated price changes from all of the sales pairs are used to create a price index.
Richard Simonelli, Vice President, Investor Relations (202) 346-6394 email@example.com.
For more information about the CCRSI Indices, including the full accompanying data set and research methodology, legal notices and disclaimer, please visit http://www.costargroup.com/costar-news/ccrsi.
About CoStar Group, Inc.
CoStar Group, Inc. (NASDAQ: CSGP) is the leading provider of commercial real estate information, analytics and online marketplaces. 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. LoopNet is the most heavily trafficked commercial real estate marketplace online with over 5 million monthly unique visitors per month. Apartments.com, ApartmentFinder.com, ForRent.com, ApartmentHomeLiving.com, Westside Rentals, AFTER55.com, CorporateHousing.com, ForRentUniversity.com and Apartamentos.com form the premier online apartment resource for renters seeking great apartment homes and provide property managers and owners a proven platform for marketing their properties. CoStar Group's websites attracted an average of approximately 34 million unique monthly visitors in aggregate throughout 2017. Headquartered in Washington, DC, CoStar maintains offices throughout the U.S. and in Europe and Canada with a staff of over 3,700 worldwide, including the industry's largest professional research organization. For more information, visit www.costargroup.com.