Friday, March 13, 2015

CoStar: Commercial Real Estate prices increased in January

by Bill McBride on 3/13/2015 11:18:00 AM

Here is a price index for commercial real estate that I follow. 

From CoStar: CRE Price Indices Start 2015 on a Strong Note with Solid Gains in January

COMPOSITE PRICE INDICES POST SOLID GAINS IN JANUARY 2015. Following a strong 2014, prices for commercial real estate (CRE) continued to climb in January 2015, supported by an expanding economy, strengthening market fundamentals and continued low interest rates. 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—each increased by 1.2% in January 2015, contributing to annual gains of more than 12% in each index.

VALUE-WEIGHTED COMPOSITE INDEX REACHES NEW HIGH. Thanks to steady gains in recent months, the value-weighted U.S. Composite Index reached a record high in January 2015, and now stands 7.5% above its prerecession peak in 2007, reflecting strong competition among investors for large, high-quality commercial properties.

EQUAL-WEIGHTED COMPOSITE INDEX RISES TO WITHIN 13.4% OF PRERECESSION HIGH. After beginning its recovery later in the current cycle, the equal-weighted U.S. Composite Index has continued to grow steadily in the 12 months since January 2014, although it remains 13.4% below its 2007 prerecession peak. The increase in the equal-weighted U.S. Composite Index, which is influenced by smaller deals, reflects the general movement of capital into secondary markets and property types, as investors search for higher yields after property pricing has escalated in core U.S. coastal markets.
emphasis added
Commercial Real Estate Prices Click on graph for larger image.

This graph from CoStar shows the the value-weighted U.S. Composite Index and the equal-weighted U.S. Composite Index indexes.

 The value weighted index is at a record high, but the equal weighted is still 13.4% below the pre-recession peak.

There are indexes by sector and region too.

Commercial Real Estate Distress SalesThe second graph shows the percent of distressed "pairs".

The distressed share is down from over 35% at the peak, but still a little elevated.

Note: These are repeat sales indexes - like Case-Shiller for residential - but this is based on far fewer pairs.