Pricing Gains Hold Their Course

WASHINGTON, DC—Commercial property pricing gained 10.1% in the 12 months ended July 31 according to the value-weighted US Composite Index, CoStar Group said Wednesday. The equal-weighted US Composite Index advanced 7.2% on a year-over-year basis; both of the CoStar Commercial Repeat Sale Indices advanced by 1.3% in the month of July.

The value-weighted index, which is influenced by high-value trades, is now nearly 25% above the peak it achieved prior to the downturn. For the equal-weighted index, pricing is within 1% of its pre-recession peak, buoyed by increased investor interest in properties beyond primary markets.

Both CCRSIs have increased on a wave of healthy market fundamentals, low interest rates and continued availability of investment capital leading to a healthy environment for commercial real estate price growth, according to CoStar. They're based on 1,258 repeat sale pairs in July 2016 and more than 164,000 repeat sales since 1996.

Results were more varied for the two segments of the equal-weighted CCRSI. The General Commercial segment increased by 1.4% in July 2016 and 7.5% for the 12 months ended July 31, while the Investment-Grade segment declined 1.4% for the month, although it was still up 2.8% Y-O-Y. The General Commercial Index has moved to within 1.1% of its prerecession peak.

And while pricing has continued to climb, transaction volume remains lower than what we saw in 2015. Total composite pair volume of $68.9 billion year-to-date through July 31 was 2.8% lower than in the year-ago period, CoStar says. The firms says the deceleration in trading activity is likely to contribute to more modest price growth for the balance of this year than the record pace of the preceding two years.

That being said, CoStar notes that property markets remain highly liquid, judging by other metrics. For-sale properties' average time on the market has declined by 20.0% over the preceding 12 months. The sale-price-to-asking-price ratio narrowed by 2.5 percentage points in the last 12 months to 95.3% in July, marking the highest this ratio has been since August 2006. In addition, the share of properties withdrawn from the market by discouraged sellers declined by 4.2 percentage points to 29.3% over the past 12 months.

WASHINGTON, DC—Commercial property pricing gained 10.1% in the 12 months ended July 31 according to the value-weighted US Composite Index, CoStar Group said Wednesday. The equal-weighted US Composite Index advanced 7.2% on a year-over-year basis; both of the CoStar Commercial Repeat Sale Indices advanced by 1.3% in the month of July.

The value-weighted index, which is influenced by high-value trades, is now nearly 25% above the peak it achieved prior to the downturn. For the equal-weighted index, pricing is within 1% of its pre-recession peak, buoyed by increased investor interest in properties beyond primary markets.

Both CCRSIs have increased on a wave of healthy market fundamentals, low interest rates and continued availability of investment capital leading to a healthy environment for commercial real estate price growth, according to CoStar. They're based on 1,258 repeat sale pairs in July 2016 and more than 164,000 repeat sales since 1996.

Results were more varied for the two segments of the equal-weighted CCRSI. The General Commercial segment increased by 1.4% in July 2016 and 7.5% for the 12 months ended July 31, while the Investment-Grade segment declined 1.4% for the month, although it was still up 2.8% Y-O-Y. The General Commercial Index has moved to within 1.1% of its prerecession peak.

And while pricing has continued to climb, transaction volume remains lower than what we saw in 2015. Total composite pair volume of $68.9 billion year-to-date through July 31 was 2.8% lower than in the year-ago period, CoStar says. The firms says the deceleration in trading activity is likely to contribute to more modest price growth for the balance of this year than the record pace of the preceding two years.

That being said, CoStar notes that property markets remain highly liquid, judging by other metrics. For-sale properties' average time on the market has declined by 20.0% over the preceding 12 months. The sale-price-to-asking-price ratio narrowed by 2.5 percentage points in the last 12 months to 95.3% in July, marking the highest this ratio has been since August 2006. In addition, the share of properties withdrawn from the market by discouraged sellers declined by 4.2 percentage points to 29.3% over the past 12 months.