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CoStar Commercial Repeat-Sale Analysis: Commercial Real Estate Prices Level-Off
WASHINGTON -- After four consecutive
months of positive price movement, CoStar's monthly National Composite
Index of commercial real estate prices posted a slight decline of 0.5%
in August 2011, driven mainly by softening pricing of high-end
commercial properties, the segment most sensitive to the recent global
financial market upheaval. This month's CoStar Commercial Repeat Sale
Index ("CCRSI") provides the market's first look at August 2011
commercial real estate pricing and offers the broadest measure of
commercial real estate repeat sales activity. This month's analysis is
based on 839 repeat sale transactions in August 2011 and more than
100,000 repeat sale transactions since 1998.
August 2011 Highlights
-- The General Commercial Index continued its upward trend over the last
four months, and prices gained 0.1%. The monthly Investment Grade Index,
on the other hand, declined 2.7% during the month of August, giving back
its 1% gain in July 2011.
-- The August price drop for the Investment Grade Index was accompanied by
a slight decline in both distress and non-distress transactions,
reflecting recent capital markets volatility and reduced CMBS
lending.
-- The steadiness in the General Commercial Grade Index was supported by
increased sales of non-distressed properties. Overall distress sales as
a percentage of total sales have declined gradually in the last six
months, although the percentage of distress sales has fallen more
rapidly in the General Commercial index than in the Investment Grade
index.
-- Commercial real estate market fundamentals remained stable through
August. CoStar Group's analysis of third quarter 2011 data found that
occupancy continued to improve across all commercial property types,
although as yet without broad-based rent growth. This stability helped
to mitigate the impact of economic uncertainty as observed in the
movement of the General Commercial Index.
-- A critical factor in future commercial real estate price movement to
watch for in coming months is the degree to which current economic woes
impact the availability of real estate financing, and whether they
result in deteriorating market fundamentals.
-- CCRSI Index Results
-- CoStar's Composite Commercial Repeat Sales Index decreased by 0.5% in
August 2011. It is now 3.6% below the same period last year and 34.3%
below its peak in August 2007.
-- CoStar's General Grade Commercial Repeat Sales Index increased by 0.1%
in August 2011 and is now 4.6% below its year-ago level and off 34.2%
from its August 2007 peak.
-- CoStar's Investment Grade Commercial Repeat Sales Index decreased 2.7%
in August 2011 and is now 1.4% above the same period last year and 35.6%
below its peak in August 2007.
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