CoStar’s National Price Index Extends New High as Property Price Gains Continue

Article originally posted on CoStar on December 29, 2016
Strong Office, Retail, Warehouse Absorption, Brisk Leasing of Smaller Properties Helps Extend Broad-Based Recovery in Sales, Pricing

The last release of CoStar Commercial Repeat-Sale Indices (CCRSI) data for November 2016 found CRE pricing continuing its upward trek, with both of the major composite price indices advancing by more than 1% in the month of November, having already eclipsed their previous peaks and accelerating in November, exceeding their average growth rate for the January-to-October period.

The end of the year is historically a busy period for commercial property sales as investors rush to finalize deals and November was no exception.

The equal-weighted U.S. Composite Index rose 1.1% while the value-weighted U.S. Composite Index advanced 1.3% in November. The equal-weighted index is now 3.2% above its prerecession high while the value-weighted index is nearly 28% above its peak from prior to the recession as both indices exceeded the average 0.7% monthly growth rate in the first 10 months of 2016.

Robust leasing and demand from occupiers and brisk investment sales transaction activity helped support the pricing gains. Net absorption across office, retail and industrial properties is projected to total nearly 680 million square feet for 2016, a 1.5% increase from the same 12-month period ending in December 2015.

The general commercial segment, reflects performance of smaller commercial properties, posted the strongest growth in absorption over the year, with total net absorption projected to grow 22.1%. Net absorption in the investment-grade segment, weighted toward larger properties is expected to decrease 7.6% for the same period.

While composite sale-pair volume logged by the CCRSI trailed last year’s record pace through much of 2016, likely as a result of volatility in financial markets in the first half of the year, sales activity picked up in November. The $113.3 billion in composite sale volume year-to-date through November now represents a 0.8% increase over the same period a year ago.