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Wednesday, February 09, 2011

CoStar: Commercial Real Estate prices increased slightly in December

by Calculated Risk on 2/09/2011 08:20:00 PM

From CoStar: CoStar Commercial Repeat-Sale Indices, February 2011 Release

• At the national level, CoStar’s Investment Grade Repeat-Sale Index was up nearly 7% for the month of December continuing the see-saw pattern observed with oscillating monthly pricing data, resulting in a slight positive quarter. ... From its peak in July 2007, the Investment Grade pricing index is down 34.1%, with the trough occurring in January 2010 when the Index was down 40%.

• The strong performance of the Investment Grade index was enough to lift the U.S. national Composite Index, which is an equal-weighted repeat sales analysis of all commercial real estate sales, with two thirds of the transaction count contained within the General Index. The Composite Index was up 1.8% for the month, down 5.8% for the quarter and down 6.3% for the year. Overall the Composite Index is down 22% over the past two years.
emphasis added
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 general commercial index was down, the other two were up slightly from November.

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. On the number of "pairs":
The CCRSI January 2011 report is based on data through the end of December, 2010. In December of 2010 983 pair sales were recorded compared to 656 in the prior month, 610 in October and 690 in September. It is typical to see volume increase at year end. In December of 2009 the pair sales count was 807, so volume on this basis is up 22% from a year earlier. Distress sales as a percent of the total has been increasing in each of the four quarters in 2010 with just over 20% in the 4th quarter with 18.5% for all of 2010. By property type the highest percent of distress in the fourth quarter were for Hospitality at 36%, followed by Multifamily at 24%, office at 21% and industrial and retail both near 19%.
So this is based on only 983 transactions.