CoStar : Composite Price Index Sees Steady Gains Across Broader Market Despite Slowdown at Top End

Nov 30, 2016

Liquidity Indicators Continue To Show Positive Market for Buyers and Sellers

CCRSI RELEASE - NOVEMBER 2016
(With data through OCTOBER 2016)

This month's CoStar Commercial Repeat Sale Indices (CCRSI) provides the market's first look at commercial real estate pricing trends through October 2016. Based on 1,082 repeat sale pairs in October 2016 and more than 169,000 repeat sales since 1996, the CCRSI offers the broadest measure of commercial real estate repeat sales activity.

CCRSI National Results Highlights

• STEADY PRICE GROWTH IN SECONDARY AND TERTIARY MARKETS OFFSETS SLOWDOWN AT TOP END OF CRE MARKET. The value-weighted U.S. Composite Index, which reflects larger asset sales common in core markets, was flat in the month of October 2016, while the same index was up 8.2% in the 12 months ending in October 2016. Meanwhile 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 a stronger 1.4% in the month of October 2016, and was up by a similar annual rate of 7.8% for the 12 months ended in October 2016.

• GENERAL COMMERCIAL SEGMENT SHOWED STRONGER MOMENTUM IN 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 1.4% in October 2016 and 8.8% for the 12 months ending in October 2016. Meanwhile, the Investment-Grade segment of the index, which is influenced by higher-value properties, rose 1.4% in October 2016, in line with the 1.6% average monthly increase for the 12 months ending in October 2016. The recent momentum in the General Commercial segment demonstrates the breadth of the pricing recovery.

• TRANSACTION VOLUME IS DOWN YEAR-TO-DATE FROM RECORD PACE SET IN 2015 ALTHOUGH STILL SECOND-HIGHEST ON RECORD. Composite pair volume of $101 billion through the first 10 months of 2016 was 2.5% lower than the same period in 2015, suggesting capital flows have moderated from last year's record-setting levels. However, the year-to-date volume through October 2016 is still the second-highest January through October sales volume on record for the CCRSI.

• MATURING CRE CYCLE MAY BE CONTRIBUTING TO SLOWER PACE. While both indices have surpassed prerecession peak levels, the equal-weighted index only managed to do so in September 2016. However, thanks to its larger concentration of core properties in primary markets that were at the forefront of the recovery, the value-weighted U.S. Composite index is now 26.3% above last cycle's high-water mark. Additionally, both composite indices increased nearly 8% for the 12 months ending in October 2016, a deceleration from the double-digit annual pace of price growth seen throughout 2014 and 2015.

• OTHER LIQUIDITY MEASURES SHOW GAP BETWEEN BUYERS AND SELLERS CONTINUED TO NARROW. The average time on the market for for-sale properties dropped sharply by 17.8% in the 12-month period ending in October 2016 and the sale-price-to-asking-price ratio narrowed by 2.9 percentage points to 96.4%, the tightest this ratio has been since 2006. Meanwhile, the share of properties withdrawn from the market by discouraged sellers receded by 5.5 percentage points to 27.6% during the 12-month period ending in October 2016.

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.

MEDIA Contact:

Gay Beach, Senior Director, Marketing Communications, CoStar Group (gbeach@costar.com).

For more information about the CCRSI Indices, including the full accompanying data set and research methodology, legal notices and disclaimer, please visit http://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 more than 10 million registered members. Apartments.com, ApartmentFinder.com and ApartmentHomeLiving.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. Through an exclusive partnership with Move, a subsidiary of News Corporation, Apartments.com is the exclusive provider of apartment community listings across Move's family of websites, which include realtor.com®, doorsteps.com and move.com. CoStar Group's websites attracted an average of nearly 25 million unique monthly visitors in aggregate in the third quarter of 2016. Headquartered in Washington, DC, CoStar maintains offices throughout the U.S. and in Europe and Canada with a staff of approximately 2,800 worldwide, including the industry's largest professional research organization. For more information, visit www.costargroup.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 based upon current beliefs and are subject to many risks and uncertainties that could cause actual results to differ materially from these statements. The following factors, among others, could cause or contribute to such differences: the risk that the trends represented or implied by the indices will not continue or produce the results suggested by such trends, including trends related to commercial real estate fundamentals, price growth and liquidity measures; and the risk that transaction volume, investor demand, market supply, and commercial real estate pricing levels and growth will not continue at the levels or with the trends indicated in this release. More information about potential factors that could cause results to differ materially from those anticipated 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 in CoStar's Annual Report on Form 10-K for the year ended December 31, 2015, and CoStar's Quarterly Report on Form 10-Q for the quarter ended September 30, 2016, each of which is filed with the SEC, including in the 'Risk Factors' section of those filings, as well as CoStar's other filings with the SEC available at the SEC's website (www.sec.gov). All forward-looking statements are based on information available to CoStar on the date hereof, and CoStar assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.