Recovery in CRE Pricing Continues in February

Posted on April 19, 2013

The latest analysis from the CoStar Commercial Repeat Sale Indices (CCRSI) showed commercial real estate pricing shaking off the seasonal slowdown from January and continuing its overall upward trend with prices up significantly from year-ago levels.

Despite dipping by 0.7% and 1.4%, respectively, in the month of February 2013, 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 — are still up over the previous 12-month period. The equal-weighted index increased 6.0% since February 2012, while value-weighted index expanded by 5.1% during the same period.

Of special note among the February 2013 pricing gains, the CCRSI’s investment grade segment has now recovered by 17.9% since prices for properties in that category bottomed out in October 2009. Pricing in the larger general commercial segment has taken longer to recover, but it is now up nearly 6% from its recent trough in the first quarter of 2011, reflecting the increased real estate investment activity occurring in more secondary markets and property types.

That broadening activity was also evident in the absorption of available space during the first quarter, with the general commercial segment posting larger gains, indicating a broader and more sustained commercial real estate recovery.

After reaching record levels in a year-end spike in December 2012, property sale transactions returned to more typical levels in february 2013. The total volume of $2.9 billion in repeat-sale transactions for the month of February 2013 was in line with first quarter average monthly totals over the previous two years.

The percentage of commercial property selling at distressed prices also continued its overall trend, dropping to 15.9% in February 2013 from over 18% for the previous month.

Tim Trainor, Costar News.