Latest CoStar Commercial Repeat Sale Analysis: Commercial Real Estate Prices Post Steady Gains in November

Strong Absorption Across Property Types Support Broad Gains in Pricing

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| Source: CoStar Group, Inc.

WASHINGTON, Jan. 15, 2014 (GLOBE NEWSWIRE) -- This month's CoStar Commercial Repeat Sale Indices (CCRSI) provide the market's first look at November 2013 commercial real estate pricing trends. Based on 1,014 repeat sales in November 2013 and more than 125,000 repeat sales since 1996, the CCRSI offers the broadest measure of commercial real estate repeat sales activity.

November 2013 CCRSI National Results Highlights

  • COMMERCIAL PROPERTY PRICES CONTINUED THEIR STEADY UPWARD TRAJECTORY IN NOVEMBER: With the U.S. economy on more solid footing during the fourth quarter of 2013 and demand for commercial real estate space on the rise, pricing continued on a steady upward trajectory in November 2013. The two broadest measures of aggregate pricing for commercial properties within the CCRSI—the value-weighted U.S. Composite Index and the equal-weighted U.S. Composite Index—advanced by 0.8% and 1.1%, respectively in November 2013, and rose by a more robust 10.9% and 7.8%, respectively, over the last year.
     
  • RECENT PRICING PERFORMANCE HAS BEEN STEADIER AT THE HIGH END OF THE MARKET: The U.S. Value-Weighted Composite Index, which weights each repeat-sale by transaction size or value (and therefore is heavily influenced by larger transactions), has increased by a cumulative 51.9% since the start of 2010, reflecting steady demand for institutional-grade property assets in top-tier metro areas that led the recovery. Recent performance in the U.S. Equal-Weighted Composite Index, which weights each repeat-sale equally and is more heavily influenced by smaller transactions, has been more volatile. The Index lost ground in the third quarter of 2013 as it was significantly more impacted by uncertainty concerning the economy and interest rates, but it has since rebounded. The Equal-Weighted Index has increased 18.4% from its trough in 2011.
     
  • ABSORPTION EXPANDS AT FASTEST RATE SINCE 2007: Tenants occupied an additional 380 million square feet of office, retail and industrial space throughout the U.S. in 2013, the largest annual gain in net absorption over the past six years. The Investment Grade segment of the market continued to dominate in space absorption. However, the pace of absorption in the General Commercial segment has improved significantly as the recovery is accelerating in the secondary and tertiary markets. The General Commercial segment's share of total net absorption increased from being less than 30% for the last several years to 32% in 2013.  
     
  • DISTRESS SALES REMAIN LOW: The percentage of commercial property selling at distressed prices was slightly more than 13% in November 2013, down roughly two-thirds from the peak in 2011. Technology and energy-driven markets including Houston, Denver, Dallas, and Austin have experienced some of the strongest declines in the share of distress property sales activity over the last year, with a reduction of 80% or more. 
Monthly CCRSI Results, Data through November of 2013
  1 Month
Earlier
1 Quarter
Earlier
1 Year
Earlier
Trough to
Current
Value-Weighted U.S. Composite Index 0.8% 2.6% 10.9% 51.9%1
Equal-Weighted U.S. Composite Index 1.1% 2.0% 7.8% 18.4%2
 U.S. Investment Grade Index 0.8% 2.1% 13.6% 31.3%3
 U.S. General Commercial Index 1.3% 1.3% 6.8% 16.7%4
1 Trough Date: January, 2010 2 Trough Date: March, 2011 3 Trough Date: October, 2009 4 Trough Date: March, 2011  
 
Monthly Fundamentals, Data through December of 2013
  Net Absorption (in millions of square feet)    
  2011 2012 2013
Aggregate  296.5 307.6 380.6
Investment Grade  209.8 221.7 259.8
General Commercial  86.7 85.9 120.8
Note: "Net Absorption" is the change in occupied space, calculated based on three types of properties: office, retail, and industrial.

Several charts accompanying this release are available at http://media.globenewswire.com/cache/9473/file/24125.pdf

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 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://media.globenewswire.com/cache/9473/file/24126.pdf

CONTACT:

For more information about the CCRSI Indices, including a detailed methodology, fact sheet, legal notices and disclaimer, and an archive of previous releases, please visit http://www.costar.com/ccrsi.

ABOUT COSTAR GROUP, INC.

CoStar Group (Nasdaq:CSGP) is the leading provider of commercial real estate information, analytics 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. Through LoopNet, the Company operates the most heavily trafficked commercial real estate marketplace online with more than 7.7 million registered members. CoStar operates websites that have approximately 9 million unique monthly visitors in aggregate. Headquartered in Washington, DC, CoStar maintains offices throughout the U.S. and in Europe with a staff of approximately 2,000 worldwide, including the industry's largest professional research organization. For more information, visit http://www.costar.com.

This news release includes "forward-looking statements" including, without limitation, statements regarding CoStar's plans, objectives, expectations, beliefs, intentions or strategies regarding the future. These statements are based upon the current beliefs and expectations of management of CoStar 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; the risk that investor demand, including the rise in demand for commercial real estate space, and commercial real estate pricing levels will not continue at the levels or with the trends indicated in this release; and the pace of absorption in the General Commercial segment and the recovery in the secondary and tertiary markets may not continue at the rates stated in this release. 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, 2012, and CoStar's Quarterly Report on Form 10-Q for the quarter ended September 30, 2013, under the heading "Risk Factors." All forward-looking statements are based on information available to CoStar on the date hereof, and CoStar does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Mark Klionsky
Senior Vice President-Marketing
(800) 681-1513