Saturday, April 16, 2011

CoStar: Commercial Real Estate prices increased slightly in February

by Bill McBride on 4/16/2011 09:15:00 PM

From CoStar: CoStar Pricing Performance Varies Significantly Between Different Regions and Property Types

• The Composite Index, which is an equal-weighted analysis repeat sale pricing index incorporating both the Investment Grade and General Grade indices and a reflection of the broad overall market, posted a slight increase in property value for the month of February of 0.6%, reflecting the strong monthly increase in the General Grade repeat sale index. The Composite Index is down 7.5% year over year. [this is off 30.5 from the peak in August 2007]

• At the national level, CoStar’s Investment Grade Commercial Repeat-Sale Index is up 6.8% compared with the same period last year, even after four consecutive months of declines, including a very slight 0.3% decline in February. [this is off 34.8% from the peak in June 2007]

• CoStar’s General Grade Index is down 10.9% compared with the same period last year, although this pricing index has trended upward recently, posting two consecutive months of increases, including a strong 0.8% increase from January to February. [this is off 29.0% from the peak in June 2007]
CoStar CRE Price Index Click on graph for larger image in new window.

This graph from CoStar shows the indexes for investment grade, general commercial and a composite index. The Investment Grade was down, the other two were up slightly in February.

It is important to remember that there are very few CRE transactions (compared to residential), and that there is a high percentage of distressed sales, so prices are very volatile. Also CoStar is seeing significant variations in pricing performance between different regions and property types. A couple of examples:
• Multifamily pricing in the Northeast at the end of 2010 stood within 4.8% of its peak level according to CoStar’s Northeast Multifamily pricing index.

• At the other end of the spectrum, CoStar’s West Office pricing index remains 43% below its peak-pricing level.
With apartment vacancy rates falling rapidly, and rents rising, it is no surprise that multifamily is the best performing property type.

Earlier:
Summary for Week ending April 15th
First Look at 2012 Cost-Of-Living Adjustments and Maximum Contribution Base