Pricing Gains Seen in Lower End of Market as Top-End Sales Slow

Article originally posted on CoStar on March 2, 2017

The first release of CoStar Commercial Repeat-Sale Indices (CCRSI) data for 2017 showed pricing of lower-priced CRE properties moving back into positive territory during January, helping offset an ongoing deceleration in pricing among larger assets in core U.S. markets.

The equal-weighted U.S. Composite Index advanced by 1.4% during January, reversing a 1.4% decline the previous month. The equal-weighted index reflects the more numerous but lower-priced and smaller property typical in second- and third-tier markets, increased by 7.5% for the 12-month period ending in January 2017.

The value-weighted U.S. Composite Index, reflecting larger asset sales in primary markets, posted a 0.9% decline in January 2017, smaller than December’s 1.3% drop, while showing a gain of 5.2% over the 12-month period.


 

 

 

 

 

 

The two sub-indices of the equal-weighted index mirrored the trend toward gains in lower-priced assets. As more investors continued to fan out in search of smaller properties in non-primary markets, the General Commercial segment of the index influenced by smaller, lower-priced property deals increased 1.4% in January 2017 and 8.5% for the 12-month period.

The investment-grade segment, meanwhile, declined 0.2% during the month and gained only 1.6% in the 12 months ending in January 2017.

 

 

 

 

 

 

Other measures of transaction liquidity also pointed to the resilience in CRE sale activity. The ratio between the price of closed sales and the asking price narrowed by 3.8 percentage points to 97.3% in the 12-month period, its tightest gap since 2006.

 

 

 

 

 

 

The share of properties withdrawn from the market by discouraged sellers continued to recede on an annual basis. While the average time of properties spent on the market prior to sale remained unchanged at 278 days from December, the average time spent on the market for the 12-month period ending in January is nearly 13% average below the prior 12-month period ending in January 2016.

Monthly CCRSI Results Data Through January 2017

 

% Change 1 Month
Earlier
1 Quarter
Earlier
1 Year
Earlier
Through to
Current
Value-Weighted U.S.
Composite Index
-0.9% -1% 5.2% 96%
Equal-Weighted U.S.
Composite Index
-1.4% 1.1% 7.5% 60.6%
U.S. Investment-
Grade Index
-0.2% -1.4% 1.6% 65.7%
U.S. General
Commercial Index
-1.4% 1.5% 8.5% 60.4%
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