According to Sources at CoStar:
This month's CoStar Commercial Repeat Sale Indices
(CCRSI) provides more evidence of two broad trends in the commercial real estate investment market:
the continued strong demand for top quality institutional-grade assets by big
investors, and widening investor demand for mid- and lower-quality commercial
property as the pricing recovery extended to smaller markets and secondary
property types.
Based on an analysis of 1,028 repeat sales in February
2014 and more than 125,000 repeat sales since 1996, the CCRSI found commercial
real estate prices registered broad gains during that month. 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-gained 1.1% and 1.7%, both reached double-digit growth over the previous
12-month period.
The value-weighted U.S. Composite Index, which is more
heavily influenced by high-value property sales that have seen prices skyrocket
over the last two years, has risen to levels not seen since early 2008,
reaching to within 5% of its pre-recession peak.
Meanwhile, the equal-weighted U.S. Composite Index,
which is more heavily influenced by the more-numerous lower-value trades,
remained 22.3% below its prior peak. However, pricing for lower-end properties
appears to be gaining momentum. The index made its strongest annual gain in
February 2014 since the current recovery began, advancing by 15.7% over the
last 12 months as investors continued to expand their buying activity in
non-prime markets.
The momentum shift to lower quality and smaller
properties also appeared in the recent growth of the General Commercial
segment, which grew by a similar 15.7% over the previous year, while its
counterpart, the Investment Grade Index, advanced by an equally strong 15% over
the same period.
In reporting on commercial property pricing trends,
CoStar's CCRSI made note of the continued positive net absorption across the
three major property types - office, retail and industrial - which totaled
378.2 million square feet, a 15.3% increase from the prior 12-month period.
Consistent with recent pricing trends, net absorption within the General
Commercial segment rose 48% during the same period, compared with a 5% annual
gain for the same period in the Investment Grade segment.
In keeping with the pattern set in previous years, the
number of properties trading hands over the first three months of year is
typically one-third lower than year-end sale volume. However, despite the
slowdown, the CCRSI noted that transaction activity through February 2014
suggests that the year as a whole will be very active for commercial real
estate investment. Having racked up a composite pair volume of nearly $10
billion through the first two months of the year, 2014 has already exceeded
first quarter 2013
