PRESS RELEASE

CCRSI RELEASE – July 2023
(With data through June 2023)

 
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Complete CCRSI data set accompanying this release

This month's CoStar Commercial Repeat Sale Indices (CCRSI) provides the market's first look at commercial real estate pricing trends through June 2023. Based on 1,150 sale pairs in June 2023 and more than 292,879 repeat sales since 1996, the CCRSI offers the broadest measure of commercial real estate repeat sales activity.

CCRSI National Results Highlights

• U.S. COMPOSITE PRICE INDICES WERE MIXED IN JUNE 2023. Following nine months of declines from August 2022 to April 2023, the value-weighted U.S. Composite Index, more heavily influenced by high-value trades common in core markets, posted its second consecutive monthly increase in June 2023 to 274. While the 1.3% month-over-month increase was a positive step forward, the 17-month trend of decelerating year-over-year price momentum remained intact. Through June 2023, the value-weighted index stood 9.4% lower than thresholds from one year ago.

• The equal-weighted U.S. Composite Index has been sending conflicting month-over-month price signals for the last year. This index, which reflects the more numerous but lower-priced property sales typical of secondary and tertiary markets, fell three points to 312 in June 2023, a decrease of 0.9% over the prior month. After trending lower for the last year and a half, the equal-weighted index’s year-over-year growth fell 1.1% in June 2023, marking the first negative print since February 2012.

• Both composite indices have been on a broad deceleration trend year-over-year since the first half of 2022 as markets responded to rising interest rates.

• JUNE 2023 MARKS THE FIRST MONTH SINCE OCTOBER 2022 WHERE THE EQUAL- WEIGHTED GENERAL COMMERCIAL COMPOSITE INDEX FAILED TO BEAT INVESTMENT- GRADE PRICE PERFORMANCE.

• The general commercial sub-index, more heavily influenced by lower-value assets, logged its first negative print, down 0.8% on the month, since dragging 0.1% lower in January 2023. The index climbed 1.2% over the 12 months ending in June 2023 but, at its current trajectory, may dip into the red during the back half of 2023. The index’s year-over-year growth rate peaked in May 2022 at 18.4%.

• The investment grade sub-index, more heavily influenced by higher-value assets, declined by 0.2% in June 2023, stepping backward in nine of the last 12 months. The index lost 13.5% of its value during the 12 months ending in June 2023, the seventh consecutive month of year-over- year price declines. Investment grade year-over-year price increases peaked in June 2022 at 22.3%.

• Overall transaction volume DECLINED 47% FROM THE PRIOR YEAR IN JUNE. Composite pair volume of $130.4 billion in the 12 months ending in June 2023 marked a 47.5% decline compared to the 12 months ending in June 2022. The pullback in volume was more concentrated at the upper end of the market, with the investment grade segment dropping 52.9%, compared to general commercial’s fall of 36.5% over the same period.

• AS A PERCENT OF REPEAT-SALE TRADES, INVESTMENT-GRADE DISTRESSED SALES ACCELERATED IN JUNE 2023. Only 27 of the 1,150 repeat-sale trades in June 2023, or about 2.3%, were distressed sales. General commercial accounted for 14 distressed trades, or 1.2% of all repeat-sales transactions, which was below its five-year pre-pandemic monthly average of 2.6%. However, with a noticeable uptick, investment-grade distressed sales rose to 13 trades, matching its five-year pre-pandemic monthly average of 1.1%. June 2023 signifies the first time the sub-index climbed above one percent since November 2018.

QUARTERLY CCRSI PROPERTY TYPE RESULTS

• PROPERTY TYPE PRICE TRENDS MAINTAINED SIMILARITIES OVER THE PRIOR QUARTER. Including land and hospitality, the equal-weighted property type indices’ average price growth moved sideways in the second quarter, up just 0.2%. Except for land values, the property types exhibiting positive quarter-over-quarter pricing, including industrial, retail, and hospitality in the first quarter of 2023, held on to positive momentum in the second quarter of 2023. Similarly, the negative pricing trends in office and multifamily during the prior four quarters carried over to the second quarter of 2023. Tight pricing correlations between Prime markets and the national trends in industrial and multifamily signify the destination of the strongest capital flows.

• THE EQUAL-WEIGHTED INDUSTRIAL INDEX LED PRICING GROWTH AMONG THE FOUR MAJOR PROPERTY TYPES. The equal-weighted U.S. Industrial Index was up 2.4% in the second quarter of 2023. However, in the 12 months ending in June 2023, the index was barely positive at 0.7%, down from 26.9% in the second quarter of 2022. Among the value-weighted indices, the industrial index was the last remaining holdout to enter negative territory, which gave back 2.8% of value during the 12 months ending in June 2023. The value-weighted index is down 5.2% from its highs in the third quarter of 2022.

• MULTIFAMILY PRICE DECLINES ACCELERATED TO THE DOWNSIDE. The equal-weighted U.S. Multifamily Index sagged 2.2% in the second quarter of 2023 but plummeted 11.9% in the 12 months ending in June 2023. The multifamily indexes showed the most severe quarter-over- quarter pricing decline of all property types. The value-weighted U.S. Multifamily Index fared similarly in the second quarter of 2023, with a decline of 2.4%. However, it gave up 14% of its value in the 12 months ending in June 2023.

• OFFICE MANAGED TO PARE BACK QUARTERLY PRICED ECLINES. The equal-weighted U.S. Office Index slipped 1.6% in the second quarter of 2023, besting prior declines of 2.2% and 3.1% in the first quarter of 2023 and the fourth quarter of 2022, respectively. During the 12 months ending in June 2023, equal-weighted office prices were off by 7.1%. While losing less value than the prior quarter, the value-weighted U.S. Office Index gave back 14.2% in the 12 months ending in June 2023. The value-weighted index is lower by 20.8% from the highs witnessed in the fourth quarter of 2021.

• RETAIL PRICES ADVANCED IN THE SECOND QUARTER OF 2023. The equal-weighted U.S. Retail Index climbed 0.7% in the second quarter of 2023. Yet, the index price gains slowed to 1.2% in the 12 months ending in June 2023. The value-weighted U.S. Retail Index also stepped higher in the second quarter of 2023, now 1.4% above the prior quarter. Once boasting 12% annual price gains in the first quarter of 2022, the value-weighted index just posted its second consecutive quarter of annual declines, losing 1.2% in the 12 months ending in June 2023.

• THE U.S. HOSPITALITY INDEX OUTSHINED. The U.S. Hospitality Index was up an impressive 3% in the second quarter of 2023, pushing annual gains of 2.6% in the 12 months ending in June 2023. Despite the positive quarter, low single-digit pricing growth is substantially off the annual growth rate of 24.7% in the first quarter of 2022.

• THE U.S. Land Index FELL IN RESPONSE TO NEGATIVE VALUE-WEIGHTED PRICE PERFORMANCE. The equal-weighted U.S. Land Index fell 1.2% in the second quarter of 2023, pulling down the annual growth rate to 7.4% in the 12 months ending in June 2023. The step lower reflects the ongoing slowdown in new construction activity.

QUARTERLY CCRSI REGIONAL RESULTS

• MULTIFAMILY PRICE DECLINES WEIGHED ON AGGREGATE GROWTH IN THE SOUTH. The South Composite Index advanced for the second consecutive quarter, up 2.4% in the second quarter of 2023. However, the index’s annual gains were markedly lower than the prior quarter. As of the second quarter of 2023, year-over-year pricing slowed across all property types and landed at 3.9% for retail, 0.6% for office, flat for industrial, and down 5.6% for multifamily.

• THE NORTHEAST SHOWED NEGATIVE PRICING MOMENTUM ACROSS ALL PROPERTY TYPES. The equal-weighted Northeast Composite Index declined by 2.1% in the 12 months ending in June 2023 while falling 1.9% in the second quarter of 2023. The value-weighted index’s quarterly performance matched, while the annual declines were less severe at 0.7% in the 12 months ending in June 2023. Although all four property types were in the red, annual price declines of 0.5% for industrial, 1.6% for retail, 1.7% for office, and 7.4% for multifamily over the 12 months ending in June 2023 show that the correction is broad-based and trending.

• THE MIDWEST’S EQUAL-WEIGHTED INDEX POSTED THE STEEPEST ANNUAL PRICE DECLINE. The Midwest region experienced the largest equal-weighted price decline of the four regions, giving back 5.8% during the 12 months ending in June 2023. The second quarter of 2023 was off by 2.1%. Office and multifamily have been most impacted by the price declines, with annual drops of 8.5% and 8%, respectively, through the 12 months ending in June 2023. Retail gave back less with a 3.2% value depletion, and industrial handed over 0.4% losses after annual gains peaked above 20% in the first quarter of 2022.

• THE WESTWARD HELD ON TO QUARTERLY GAINS. The equal-weighted West Composite Index captured 0.6% value gains in the second quarter of 2023 after three consecutive quarters of losses. However, the index fell by 4.2% during the 12 months ending in June 2023. The value- weighted index showed the sharpest annual fall among regions and quality, with 10% price declines through the same period. Of all 16 property regions, the West’s office and multifamily fared the worst with value dilution of 8.7% and 13.7%, respectively.

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 (presented in both equal-weighted and value-weighted versions), national Investment-Grade Index, and national General Commercial Index, which are reported monthly, 30 sub-indices in the CoStar index family are reported quarterly. 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 the sales pairs are used to create a price index. Historical price indices are revised as new data is recorded.

MEDIA CONTACT:

Matthew Blocher, Vice President, Marketing & Communications, CoStar Group (mblocher@costar.com).

For more information about the CCRSI Indices, including the full accompanying data set and research methodology, legal notices, and disclaimer, please visit https://costargroup.com/costar-news/ccrsi/.

ABOUT COSTAR GROUP, INC.

CoStar Group, Inc. (NASDAQ: CSGP) is a leading provider of online real estate marketplaces, information, and analytics. 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. STR provides premium data benchmarking, analytics, and marketplace insights for the global hospitality industry. Ten-X provides a leading platform for conducting commercial real estate online auctions and negotiated bids. LoopNet is the most heavily trafficked commercial real estate marketplace online. 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. Homesnap is an industry-leading online and mobile software platform that provides user-friendly applications to optimize residential real estate agent workflow and reinforce the agent-client relationship. Homes.com offers real estate professionals advertising and marketing services for residential properties. Realla is the UK’s most comprehensive commercial property digital marketplace. BureauxLocaux is one of the largest specialized property portals for buying and leasing commercial real estate in France. CoStar Group’s websites attract tens of millions of unique monthly visitors. Headquartered in Washington, DC, CoStar Group maintains offices throughout the U.S., Europe, Canada, and Asia. From time to time we plan to utilize our corporate website, www.costargroup.com, as a channel of distribution for material company information. For more information, visit www.CoStarGroup.com