Latest CoStar Commercial Repeat-Sale Analysis: Property Price Growth Rebounds in Second Quarter
WASHINGTON, July 29, 2016 (GLOBE NEWSWIRE) -- This month's CoStar Commercial Repeat Sale Indices (CCRSI) provides the market's first look at June 2016 commercial real estate pricing. Based on 1,535 repeat sales in June 2016 and more than 163,000 repeat sales since 1996, the CCRSI offers the broadest measure of commercial real estate repeat sales activity.
A chart accompanying this release is available at http://www.globenewswire.com/NewsRoom/AttachmentNg/f787a59e-37a8-4ccd-b03e-1e1cd6c537ae
CCRSI National Results Highlights
- CRE PRICE INDICES RESUMED HEALTHY GROWTH IN SECOND QUARTER. After experiencing modest growth in the first quarter of 2016 in the wake of global economic uncertainty, both CCRSI's national composite price indices ended the second quarter of 2016 on a stronger note as investor confidence rebounded. The value-weighted U.S. Composite Index, which is influenced by the sale of high-quality, larger assets, advanced by 3.3%, while the equal-weighted U.S. Composite Index, which reflects the more numerous sales of smaller properties, rose 2.1% in the second quarter of 2016.
- HOWEVER, THE PACE OF PRICE GROWTH HAS MODERATED ON AN ANNUAL BASIS. While price growth resumed in both composite indices during the second quarter of 2016, the rate of increase has dropped into the single digits as of June 2016 from a double-digit annual pace in the 12-month periods ending in June 2014 and June 2015. This suggests the pace of price growth may continue to plateau in 2016 as the current cycle advances.
- TRANSACTION VOLUME REMAINS LOWER THAN LAST YEAR'S RECORD-SETTING PACE. Total investment sales volume of $57.7 billion in the first half of 2016 was down 5.4% compared to the first half of 2015 as capital flows continued to decelerate from last year's record-setting level. Favorable market conditions and deteriorating international economic conditions appear to provide the motivation for continuing elevated liquidity in the U.S. real estate markets.
- MAJOR PROPERTY SECTORS POST UNIFORM GROWTH OF NEARLY 2% IN SECOND QUARTER. Showing steady, consistent growth across the CRE property spectrum, the U.S. office, industrial, and retail indices advanced a solid 1.9%, while the U.S. Multifamily Index increased by 1.8% in the second quarter of 2016.
- HOSPITALITY INDEX NEARLY FULLY RECOVERED. Although it had the largest peak-to-trough decline of any property type in the last recession, the Hospitality Index posted the strongest growth in the second quarter of 2016, advancing by 4.5% to reach within 1% of its prior peak level.
- WEST REGION SURPASSES PRERECESSION PEAK. While all four U.S. regional indices saw healthy growth in the second quarter of 2016, the West Composite Index advanced past its previous cyclical high reached in 2007, becoming the second region to do so behind the Northeast Composite Index.
Monthly CCRSI Results, Data Through June 2016
|1 Month Earlier||1 Quarter Earlier||1 Year Earlier||Trough to Current|
|Value-Weighted U.S. Composite Index||1.4||%||3.3||%||9.0||%||96.2%1|
|Equal-Weighted U.S. Composite Index||1.3||%||2.1||%||6.8||%||52.8%2|
|Equal-Weighted U.S. Investment-Grade Index||1.4||%||0.7||%||4.0||%||64.8%3|
|Equal-Weighted U.S. General Commercial Index||1.3||%||2.4||%||7.6||%||51.7%4|
|1 Trough Date: January 2010 2 Trough Date: March 2011 3 Trough Date: March 2010 4 Trough Date: March 2011|
Quarterly CCRSI Property Type Results
- PRICING GAINS STEADY ACROSS MAJOR PROPERTY SECTORS DURING SECOND QUARTER. As previously mentioned, all four major property types posted price growth of nearly 2% during the second quarter of 2016. The Prime Markets Indices within each property sector—dominated by the large, core, coastal metros—generally have increased more rapidly than the national property type indices, further suggesting that commercial property in core markets remained attractive to investors, even as overall investment volume slowed from its record-setting pace last year.
- MULTIFAMILY INDEX REMAINS U.S. GROWTH LEADER. The U.S. Multifamily Index expanded 1.8% in the second quarter of 2016 and 8.5% in the 12-month period ending in June 2016 to post the strongest 12-month rate of the four major property indices. The Multifamily Index has far eclipsed its previous high level in 2007, ending the second quarter of 2016 22.1% higher. Notably, the Prime Multifamily Metros Index has skyrocketed 48.4% above 2007 levels. While an unprecedented pipeline of new supply is beginning to exert pressure on multifamily market fundamentals nationally, vacancy rates remained relatively tight at 4.1% in the second quarter of 2016.
- RETAIL INDEX HAS FULLY RECOVERED. The U.S. Retail index rose 1.9% in the second quarter of 2016 and 6.3% in the 12-month period ending in June 2016, edging past its prerecession peak by 0.7%. Pricing gains for retail property have largely aggregated in the top-tier trade areas during the recovery. As a result, the Prime Retail Metros Index has now advanced 19.6% above its prior peak after increasing 9.4% in the 12-month period ending in June 2016.
- HEALTHY FUNDAMENTALS SUPPORTED QUARTERLY PRICE GAINS IN OFFICE SECTOR. The U.S. Office Index increased 1.9% in the second quarter of 2016 and 7.5% in the 12-month period ending in June 2016, as office rent growth and occupancy rates have nearly reached the previous market peak. Price growth was higher in the Prime Office Metros Index, which advanced by a stronger 2.8% for the second quarter of 2016 and 11.6% for the 12-month period ending in June 2016.
- U.S. INDUSTRIAL INDEX POSTED SOLID QUARTERLY GAIN. Industrial market fundamentals remained healthy through the second quarter of 2016 as vacancies dropped below their lowest point in the previous cycle while rents continued to increase at a rate of 6%, which was higher than rent growth in the other major property types for the 12-month period ending in June 2016. Reflecting this performance, the U.S. Industrial index advanced 1.9% in the second quarter and 6.1% in the 12-month period ending in June 2016. Core industrial markets remained in favor among investors as the Prime Industrial Metros Index advanced by 9.5% in the 12-month period ending in June 2016.
- WITH 4.5% SECOND-QUARTER INCREASE, U.S. HOSPITALITY INDEX POSTED STRONGEST GROWTH RATE AMONG ALL PROPERTY INDICES. CCRSI's hotel index was the only property type index to post double-digit annualized growth through June 2016. National hotel occupancies have climbed well above last cycle's highs, fueling room rate and RevPAR growth as well as investor demand. While the Hospitality Index suffered the largest peak-to-trough decline in the last cycle, dropping 44.2%, it has now moved to within 1% of its prerecession peak.
- STRONG DEMAND FOR DEVELOPMENT SITES BOOSTS U.S. LAND INDEX. The Land index advanced 1.8% in the second quarter of 2016 and 8% in the 12-month period ending in June 2016. Despite healthy recent gains, the Land Index, which did not reach its trough for this cycle until very late in the cycle in 2012, remains 13.6% below its previous peak.
Quarterly CCRSI Regional Results
- NORTHEAST REGIONAL INDEX REMAINED FASTEST-GROWING IN 12-MONTH PERIOD ENDING IN JUNE 2016. Once again benefitting from a strong concentration of top-tier markets that have been a magnet for investment since early in the current cycle, the Northeast Composite Index advanced 1.8% in the second quarter of 2016 and 8.2% for the 12-month period ended in June 2016, pushing it 17.4% above its prerecession peak. All four property type indices (Office, Retail, Multifamily and Industrial) within the Northeast region have surpassed their prerecession peaks as well. The Northeast Multifamily and Retail Indices led pricing growth in the region and have soared past their prior peak pricing levels by 48.9% and 26.1%, respectively. Meanwhile, solid growth in the Northeast Office and Industrial Indices during the second quarter of 2016 propelled both above their prerecession peak levels, by 6.6% and 7.9%, respectively.
- WEST REGION SURPASSED ITS PREVIOUS PEAK IN SECOND QUARTER. After advancing 1.3% in the second quarter of 2016 and 7.2% in the 12-month period ending in June 2016, CCRSI's West Composite Index has now surpassed its peak in the last cycle by 0.6%. The West Multifamily Index has seen the strongest performance of the four property type indices within the region, growing 10% in the 12-month period ending in June 2016, the strongest growth rate for all 16 regional property type indices. Strong fundamentals in tech-driven markets, including San Francisco and San Jose, have supported such exceptional price growth within the West Multifamily Index.
- PRICE GROWTH IN SOUTH REGION MIRRORS THE WEST. The South Composite Index increased 1.8% in the second quarter of 2016 and 7.3% in the 12-month period ending in June 2016. Similar to commercial property pricing trends in the West region, the South Multifamily Index led pricing growth in the South region, expanding 8.6% in the 12-month period ended in June 2016. Growth in the South Multifamily Index has been particularly strong, surpassing its prerecession peak by 7.9% in June 2016, the only property type index in the South region to do so. The South Multifamily Index also saw the steepest peak-to-trough decline (43.5%) of any property type in the region during the last downturn.
- MIDWEST REGION PRICES REBOUND IN SECOND QUARTER. After falling 0.9% in the first quarter of 2016, the Midwest Composite Index bounced back in the second quarter of 2016, growing by 2.3% to post the strongest quarterly growth rate of the four major regions. Property prices in the Midwest region still lag other regions in the recovery, however. All four regional property indices remain below previous cyclical peak levels.
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, 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 one time, 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.
More charts accompanying this release are available at http://www.globenewswire.com/NewsRoom/AttachmentNg/e5347be8-b891-4edf-9a16-cfbb1a202d40
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 second quarter of 2016. Headquartered in Washington, DC, CoStar maintains offices throughout the U.S. and in Europe and Canada with a staff of approximately 2,700 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 greater investment in top-tier or core markets, the pace of growth, continuing elevated liquidity in the U.S. real estate markets as a result of favorable market conditions and deteriorating international economic conditions, and the rising cost of debt and the expected resulting slower deal volume and price growth in 2016; and the risk that transaction activity, investor demand, market supply, vacancy rates, absorption 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 period ended June 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.