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CoStar releases first look at Q1 commercial real estate pricing based on repeat sales activity; Surge upward in regional and major commercial property type indices advances at a double digit annual rate

Via CoStargroup.com

Regional and major property type indices continued to advance at a double digit annual rate according to CoStar’s Commercial Repeat Sale Indices Report.  The report notes a surge upward in property prices during the first quarter of 2015.

CCRSI National Results Highlights 

  • COMPOSITE PRICE INDICES CONTINUED TO RISE IN THE FIRST QUARTER OF 2015.  Strong capital flows and healthy market fundamentals supported price gains across the high and low ends of the CRE market during the first quarter of 2015. The value-weighted U.S. Composite Index, which is influenced by high-quality assets in core markets, advanced by 4.7% in the first quarter of 2015 and is now 11% above the previous peak in 2007. The equal-weighted U.S. Composite Index, which weighs each transaction equally and therefore reflects the impact from more numerous smaller deals, rose 4.8% in the first quarter of 2015, although it remains 10% below its previous peak level.
  • GENERAL COMMERCIAL SEGMENT LED GROWTH WITHIN EQUAL-WEIGHTED INDEX. The CCRSI Composite Index consists of two components: a General Commercial segment, which encompasses smaller deals typical of secondary and tertiary markets, and an Investment Grade segment, which encompasses larger-sized, high-quality properties that match the type most often purchased by institutional investors. The General Commercial segment advanced by 5% in the first quarter of 2015 and 15.9% for the 12 months ending in March 2015, as non-prime markets continued to attract more investment. The index has now moved to within 11.3% of its previous peak. Meanwhile the Investment Grade Index, which is further along in the recovery, posted solid but more modest growth of 4.6% in the first quarter of 2015 and 10.5% in the 12 months ending March 2015. Reflecting its earlier recovery, that index moved to within 6% of its prior peak level In March 2015.
  • ALL MAJOR PROPERTY TYPE AND REGIONAL INDICES ADVANCED AT DOUBLE- DIGIT ANNUAL RATES THROUGH MARCH 2015.  As the CRE recovery extended to more markets and property types, all major property types and regional sectors posted double-digit annual gains through March 2015.  The Multifamily Index has already fully recovered, eclipsing its previous peak, while the Retail and Industrial Indices advanced to within 10% of their previous peak levels and the Office Index remained 15% below its previous high-water mark in 2007. Among CCRSI’s regional indices, strong investor demand in core coastal metros propelled the Northeast Composite Index 6.1% above its prior peak, while the West Composite Index moved to within 8.4% of its prior peak in March 2015.
  • FIRST QUARTER TRANSACTION VOLUME ACHEIVED RECORD HIGH IN 2015.  After reaching a new high in 2014, property sales transaction activity remained strong in the first quarter of 2015. While the first quarter is typically the weakest quarter of the year in terms of sales activity, first quarter 2015 investment volume of $27.8 billion was still more than 50% higher than in the first quarter of 2014, suggesting that capital flows will continue to be strong this year. The low cost of debt has supported robust deal volume, while low interest rates have kept spreads over the risk-free rate wide, despite historically low cap rate levels.

View the complete report with charts from CoStar Here.

For more information about the CCRSI Indices, including the full accompanying data set and research methodology, legal notices and disclaimer, please visit the CCRSI website at: http://costargroup.com/costar-news/ccrs