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Sales of Property Previously Bought at the Peak Exert Downward Pressure on Pricing Indices

/ Source: GlobeNewswire


  • Market continuing to adjust from "bubble" prices as 70.2% of the acquisitions made from 2005-2007 and subsequently sold in the first quarter of 2011 sold at a lower price.
  • Comparatively, 40.5% of acquisitions made before 2005 and subsequently sold in the first quarter of 2011 sold at a lower price.
  • 55% of the first quarter 2011 sales pairs were for properties previously purchased in 2005 or after.
  • CoStar's Investment Grade Repeat-Sale Index was down 10.5% for the first quarter following an 8.4% increase in the fourth quarter. This continues the see-saw pricing pattern observed with oscillating quarterly sales data and returns the Investment Grade Index within 2% of its market low in the fourth quarter of 2009. From its peak in the second quarter of 2007 the Investment Grade pricing index has declined 39%.
  • CoStar's General Grade Repeat Sales Index declined by 1% in the first quarter after a 5.7% decline in the fourth quarter. The General Grade Index reached a new low in the first quarter and is down 33% from its market peak in the third quarter of 2007.
  • The weak performance of the Investment Grade index during the first quarter along with the continued weakness in the General Grade Index collectively led to a 2.8% decline in the U.S. National Composite Index, which is an equal-weighted repeat sales analysis of all commercial real estate sales
  • Among the CCRSI's regional prices indices, the Northeast region of the United States continues to lead the nation in terms of strengthening prices having recovered 29% of its pre-recession pricing levels. However, the Midwest posted the strongest quarterly gain of 3.2%. The Midwest now replaces the Southeast as the only other region to join the Northeast as having gained back any of its pre-recession pricing levels.
  • Overall, pricing for commercial real estate in the Northeast remains 15% lower than its pre-recession pricing levels. The West, Midwest and Southeast regions remain down 38%, 37% and 35% respectively.
  • The Northeast region of the United States benefits from the impact of commercial property sales in New York City and Boston, two desirable core markets that have continued to attract investor interest, and have generally stronger economic conditions and superior multifamily pricing performance.
  • Retail was the only property type that did not experience a pricing decline during the first quarter of 2011. Retail posted a 1.6% gain while office declined 11.7%, industrial declined 5.1% and multifamily declined 3.1%.
  • The criteria used to determine which sales pairs are included in the Investment Grade Index has been modified. The goal of this change is to increase the differentiation between the properties tracked in the General Grade Index and the Investment Grade Index.

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, there are a total of 32 sub-indices in the CoStar index family. The sub-indices include breakdowns by property sector (office, industrial, retail, multifamily 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 10 largest metropolitan areas in the country). The CoStar national composite index is produced on a monthly basis.

The CoStar indices are constructed using a repeat sales methodology, widely considered as the most accurate way to measure price changes for real estate. The repeat sales methodology measures the movement in the prices of commercial properties by collecting data on the actual sales prices that occur when a property sells. When a property is sold more than one time, a sale pair is created. The prices from the first and second sale are then used to calculate price movement for the property. By aggregating all the price changes from all of the sale pairs, a price index is created.

Commentary on data

The CCRSI May 2011 report is based on data through the end of March 2011. In March of 2011 856 sales pairs were recorded compared to 983 in the prior month, 614 in January and 1,227 in December. It is typical to see lighter volume in the first part of the year. In March of 2010 the sales pair count was 759, so volume on this basis is up 12.8% from a year earlier.   Distress sales as a percent of the total sales pairs stood at 31.9% in March, up from 28% in February 2011 but down from 32.1% in March 2010. By property type the highest percent of distress in the first quarter was in hospitality at 42.6%, followed by office at 35%, retail at 30%, industrial at 28.4% and multifamily at 25.4%.  

Overall, there has been a significant upward trend in pair volume going back to 2009.  February 2009 appears to have been the low point in the downturn in terms of pair volume, when 405 transactions were recorded.  Since then, pair dollar volume has increased overall and the average deal sizes for both general and investment grade have increased. 

We provide one graph below showing the sales counts and a second showing dollar volume.   Note that by transaction count the general sales accounted for 85% of the total sales transaction count in February 2011 and 89% in March 2011. By volume in March 2011 the investment grade properties represented 56% of total volume. The average investment grade deal size in March 2011 was $15.2 million, $17.1 million in February 2011 and $17 million in January 2011.   The average dollar size for the general index was $1.5 million in March 2011.

For more information about CCRSI Indices, including our legal notices and disclaimer, please visit .

Charts accompanying this release are available at

About CoStar Group, Inc.

CoStar Group (Nasdaq:CSGP) is commercial real estate's leading provider of information, analytic and marketing services. 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. Headquartered in Washington, DC, CoStar maintains offices throughout the U.S. and in Europe with a staff of approximately 1,500 worldwide, including the industry's largest professional research organization. For more information, visit .

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 subject to many risks and uncertainties that could cause actual results to differ materially from these statements. More information about potential factors that could cause actual results to differ materially from those discussed 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 CoStar's Form 10-K for the year ended December 31, 2010, and CoStar's Form 10-Q for the quarter ended March 31, 2011, under the heading "Risk Factors." In addition to these statements, there can be no assurance that the industry will consistently see lighter volume in the first part of each year; that the upward trend in pair volume will continue; that February 2009 will turn out to be the low point in the downturn in terms of pair volume; that pair dollar volume and average deal sizes for both general and investment grade will continue to increase; that the trends represented or implied by the indices will continue; and that the CCRSI will be released on the date and updated on the frequency set forth in the release. All forward-looking statements are based on information available to CoStar on the date hereof, and CoStar assumes no obligation to update such statements, whether as a result of new information, future events or otherwise.

CONTACT: Media Economist Chris Macke Senior Real Estate Strategist 877-739-5192