COMMERCIAL PROPERTY PRICE INDICES SPRING FORWARD IN MAY

Transcription

1 CCRSI RELEASE JULY 2015 (With data through May 2015) COMMERCIAL PROPERTY PRICE INDICES SPRING FORWARD IN MAY RECORD LEVELS OF CRE SPACE ABSORPTION SUPPORTED BROAD PRICE GAINS This month's CoStar Commercial Repeat Sale Indices (CCRSI) provides the market's first look at May 2015 commercial real estate pricing trends. Based on 1,258 repeat sales in May 2015 and more than 140,000 repeat sales since 1996, the CCRSI offers the broadest measure of commercial real estate repeat sales activity. U.S. Composite Indices: Equal- and Value-Weighted, Data through May 2015 Index Value (2000 Dec = 100) U.S. Composite Value Weighted U.S. Composite Equal Weighted COSTAR COMMERCIAL REPEAT-SALE INDICES JULY 2015 Release (With Data through MAY 2015)

2 U.S. Equal-Weighted Indices by Market Segment, Data through May 2015 Index Value (2000 Dec = 100) U.S. Investment Grade U.S. General Commercial U.S. Pair Count, data through May 2015 U.S. Pair Volume, data through May ,500 U.S. General Commercial Pair Count U.S. Investment Grade Pair Count $16 U.S. General Commercial Pair Volume U.S. Investment Grade Pair Volume $14 2,000 $12 Number of Sale Pairs 1,500 1, Billions of Dollars $10 $8 $6 $4 $ $

3 Distressed Sale Pairs as Percentage of Total 40% 35% 30% 25% 20% 15% 10% 5% 0% U.S. Distress Sale Pairs Percentage, Data through May 2015 U.S. Investment Grade Distress Pair % U.S. General Commercial Distress Pair % Jan 08 Apr 08 Jul 08 Oct 08 Jan 09 Apr 09 Jul 09 Oct 09 Jan 10 Apr 10 Jul 10 Oct 10 Jan 11 Apr 11 Jul 11 Oct 11 Jan 12 Apr 12 Jul 12 Oct 12 Jan 13 Apr 13 Jul 13 Oct 13 Jan 14 Apr 14 Jul 14 Oct 14 Jan 15 Apr 15 Market Fundamentals, Data through June % 0.6% General Commercial Net Absorption Rate Investment Grade Net Absorption Rate 0.5% Net Absorption as Percent of Stock 0.4% 0.3% 0.2% 0.1% 0.0% 0.1% 0.2% 0.3% Mar 07 Mar 08 Mar 09 Mar 10 Mar 11 Mar 12 Mar 13 Mar 14 Mar 15

4 CCRSI National Results Highlights FOLLOWING SLOWDOWN IN APRIL, CRE PRICES REBOUNDED IN MAY WITH STRONG SHOWING ACROSS THE BOARD. 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 gained 1.4% and 1.7%, respectively, in the month of May The value-weighted U.S. Composite Index advanced 12.2% in the trailing 12 months ended May 2015, and now stands 12% above its prior peak, reflecting the strong recovery of larger, higher-value properties. The equal-weighted U.S. Composite Index began its recovery later in the cycle but has increased at a faster rate of 14.1% in the trailing 12 months ended May 2015 as smaller commercial properties continued to gain favor with investors. EQUAL-WEIGHTED INDEX GAINED MOMENTUM. The momentum shift to lower-quality and smaller properties also appeared in the recent growth of the General Commercial segment within CCRSI s equal-weighted U.S Composite Index. The General Commercial Index advanced 14.6% for the 12 months ended May 2015, the fastest rate among the four major CRE price indices during this time, while its Investment Grade counterpart rose 11.9%. CRE SPACE ABSORPTION SOARED TO HIGHEST LEVEL YET IN RECOVERY. For the 12 months ended as of the second quarter of 2015, net absorption across the three major commercial property types office, retail, and industrial totaled million square feet, a 39.3% increase over the 12-month period ended as of the second quarter of 2014, and the highest annual total on record since ROBUST LEASING ACTIVITY SUPPORTING PRICE RECOVERY EXTENSION ACROSS MORE MARKETS AND PROPERTY TYPES. Net absorption in the General Commercial segment rose 37% over the 12-month period ended as of the second quarter of Meanwhile, net absorption in the Investment Grade segment remained equally strong, increasing by nearly 40% as the flight to quality space among commercial tenants continued over the 12-month period ended as of the second quarter of In the office sector, for example, net absorption within 4- and 5-Star properties grew at nearly three times the rate of properties rated 3-Star or lower during the same period. INVESTMENT ACTIVITY CONTINUED TO SURGE. Commercial real estate trading activity in the first five months of 2015 was well above last year s total. The sales volume suggests 2015 could be another record year for commercial real estate acquisitions. In fact, the U.S. composite pair volume of $115.7 billion 1 for the 12 months ended May 2015 was the highest on record for the CCRSI, indicating that investment flows into real estate remain strong. 1 Does not include the $4.4 billion sale of Stuyvesant Town Peter Cooper Village apartments in New York City in June 2014 via deed in lieu of foreclosure.

5 Monthly CCRSI Results, Data through May Month Earlier 1 Quarter Earlier 1 Year Earlier Trough To Current Value Weighted U.S. Composite Index 1.4% 2.6% 12.2% 79.6% 1 Equal Weighted U.S. Composite Index 1.7% 2.9% 14.1% 41.3% 2 U.S. Investment Grade Index 1.5% 2.7% 11.9% 55.8% 3 U.S. General Commercial Index 1.7% 3.1% 14.6% 40.2% 4 1 Trough Date: January Trough Date: March Trough Date: March Trough Date: March 2011 Market Fundamentals Data through June 2015 Annual Net Absorption (In Millions Of Square Feet) 2012 Q Q Q Q2 Aggregate Investment Grade General Commercial Note: "Net Absorption" is the change in occupied space, calculated based on three types of properties: office, retail, and industrial. About the CoStar Commercial Repeat-Sale Indices The CoStar Commercial Repeat-Sale Indices (CCRSI) is the most comprehensive and accurate measure 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.

6 National Composite CRE Price Index All Properties General Commercial Investment Grade National Indices By Property Type Office Industrial Multifamily Regional Indices Northeast Midwest South West Regional Indices By Property Type Northeast: Office, Multifamily, Industrial, Midwest: Office, Multifamily, Industrial, South: Office, Multifamily, Industrial, West: Office, Multifamily, Industrial, Prime Market Indices By Property Type Office Multifamily Industrial Hospitality Land Prime Office Markets Prime Industrial Markets CBSA Listed Alphabetically CBSA Listed Alphabetically Boston Atlanta Los Angeles Chicago New York Dallas Orange County Houston San Francisco Los Angeles Seattle Northern New Jersey Washington, D.C. Riverside Seattle

7 Prime Markets CBSA Listed Alphabetically Boston Los Angeles New York Orange County San Diego San Francisco San Jose Washington. D.C. Prime Multifamily Markets CBSA Listed Alphabetically Boston Chicago Houston Los Angeles New York Orange County San Francisco San Jose Seattle Washington, D.C. CONTACT: Richard Simonelli, Vice President For more information about the CCRSI Indices, including the full accompanying data set and research methodology, legal notices and disclaimer, please visit ABOUT COSTAR GROUP, INC. CoStar Group, Inc. (Nasdaq: CSGP) is the leading provider of commercial real estate information, analytics and online marketplaces. 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. LoopNet is the most heavily trafficked commercial real estate marketplace online with more than 9 million registered members. Apartments.com, ApartmentFinder.com and ApartmentHomeLiving.com form the premier online apartment resource for renters seeking great apartment homes and provide property managers and owners with a proven platform for marketing their properties. CoStar operates websites with over 22.4 million unique monthly visitors in aggregate as of March Headquartered in Washington, DC, CoStar maintains offices throughout the U.S. and in Europe and Toronto, Canada with a staff of approximately 3,000 worldwide, including the industry s largest professional research organization. For more information, visit

8 This news release includes "forward-looking statements" including, without limitation, statements regarding CoStar's expectations, beliefs, intentions or strategies regarding the future. These statements are based upon current beliefs 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, including the risk that the level of commercial real estate transaction activity or sales volume is not maintained or increased through the remainder of 2015 and that 2015 is not ultimately another record year for commercial real estate acquisitions; and the risk that investor demand, commercial real estate pricing levels and investment flows into real estate will not continue at the levels or with the trends indicated 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 in CoStar's Annual Report on Form 10-K for the year ended December 31, 2014, and Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, each of which is filed with the SEC, including in the "Risk Factors" section of the filing, as well as the company's other filings with the SEC available at the SEC's website ( All forward-looking statements are based on information available to CoStar on the date hereof, and CoStar assumes no obligation to update such statements, whether as a result of new information, future events or otherwise.