August 08, 2010
Commercial Real Estate Prices decline sharply in June, by CalculatedRisk, Saturday, August 07, 2010
From CoStar: CoStar Commercial Repeat-Sales Indices, July 2010
This is a new repeat sales index for commercial real estate. Previously I've only been using the Moodys/REAL Commercial Property Price Index (CPPI) for commercial real estate.
# The commercial real estate market’s pricing has been a tale of two worlds with the largest metro markets attracting significant institutional capital and forcing prices upward over the first two quarters of 2010, while the broader market has continued to soften.
# This divergence of the two worlds may soon change as we are now witnessing a pause and softening even within the investment or institutional grade primary markets.
# Over the past ten months we have seen the overall CCRSI oscillate from positive to negative and back again, with preliminary July figures very likely to be down for the investment grade property markets. From May to June, the overall CCRSI was down 7.78% with the investment grade property declining by 4.83%, reversing previous positive movement.
CoStar CRE Price Index (see Graph image)
This graph from CoStar shows the indexes for investment grade, general commercial and a composite index. The investment grade index had been increasing - but turned sharply lower in June.
On the number of transactions:
The CCRSI July report is based on data through the end of June. In June, 665 sales pairs were recorded, up significantly from May, during which 506 transactions occurred. Overall, there has been an upward trend in pair volume going back to 2009. February 2009 appears to have been the low point in the downturn in terms of pair volume, when 374 transactions were recorded.
Distress is also a factor in the mix of properties being traded. Since 2007, the ratio of distressed sales to overall sales has gone from around 1% to above 23% currently. Hospitality properties are seeing the highest ratio, with 35% of all sales occurring being distressed. Multifamily properties are seeing the next highest level of distress at 28%, followed by office properties at 21%, retail properties at 18%, and industrial properties at 17%.
Just another index to follow!
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