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 * Repeat-Sale Indices Witnessed Price Gains In The Third Quarter Of 2023

https://www.costargroup.com/press-room/2023/repeat-sale-indices-witnessed-price-gains-third-quarter-2023-0
October 27, 2023
CCRSI
CoStar


REPEAT-SALE INDICES WITNESSED PRICE GAINS IN THE THIRD QUARTER OF 2023

Falling Benchmark Rates During The First Half Of 2023 Boosted Quarterly Price
Growth Across Most Property Types

CCRSI RELEASE – October 2023                  
(With data through September 2023)

                   
PRINT RELEASE (PDF)

COMPLETE CCRSI DATA SET ACCOMPANYING THIS RELEASE

 

This month's CoStar Commercial Repeat Sale Indices (CCRSI) provides the market's
first look at commercial real estate pricing trends through September 2023.
Based on 1,132 sale pairs in September 2023 and more than 296,739 repeat sales
since 1996, the CCRSI offers the broadest measure of commercial real estate
repeat sales activity.


CCRSI NATIONAL RESULTS HIGHLIGHTS

 * U.S. COMPOSITE PRICE INDICES ADVANCED IN SEPTEMBER 2023. The value-weighted
   U.S. Composite Index, which is more heavily influenced by high-value trades
   common in core markets, rose to 273, an increase of 0.5% over the prior
   month. However, the index dipped 9.1% in the 12-month period ending in
   September 2023.
 * Meanwhile, the equal-weighted U.S. Composite Index, which reflects the more
   numerous but lower-priced property sales typical of secondary and tertiary
   markets, climbed 1% to 318 in September 2023 over August 2023. The index also
   expanded by 1.5% in the 12-month period ending in September 2023.
 * Recent price action was influenced by lower interest rates seen in the second
   quarter of 2023 that led to increased price stability among third quarter
   closings. The yield on the U.S. 10-year treasury note reached 3.3% in April
   2023 before leaping to 4.6% by the end of September 2023.





 * TRANSACTION COUNTS FELL 37% FROM THE PRIOR YEAR. September 2023 transaction
   counts mirrored levels last seen in the first quarter of 2020. The number of
   repeat sales retreated to 1,132 transactions, and total consideration fell to
   $8.3 billion in September 2023, a 5.7% decline from the prior month.
   Investment grade transaction volume dipped 6.9% in September 2023 to $5
   billion, while the general commercial segment settled 3.9% lower than the
   prior month at $3.3 billion.
 * Composite pair volume of $108 billion during the 12 months ending in
   September 2023 was 54.8% lower than the 12-month period that ended in
   September 2022. The collapse in volume was larger in the investment grade
   segment, which tumbled by 60.4% over the 12 months that ended in September
   2023 compared to the same period ending in September 2022. The investment
   grade segment accounted for about 60.2% of the overall annual transaction
   volume during the 12 months that ended in September 2023. The general
   commercial segment, which accounted for about 39.8% of the 12-month
   transaction volume, plunged 44% over the 12 months ending in September 2023.



 * BY HISTORICAL STANDARDS, DISTRESSED REPEAT SALES REMAIN LOW. Just 25 of the
   1,132 repeat-sale trades in September 2023, or about 2.2%, were distressed
   sales. General commercial accounted for 15 of the distressed trades in
   September 2023, or 1.3% of all repeat sales trades. Ten investment-grade
   distressed sales were recorded in September 2023, accounting for 0.9% of all
   repeat sales trades.




QUARTERLY CCRSI PROPERTY TYPE RESULTS

 * EQUAL-WEIGHT PRICES GAINED IN THE THIRD QUARTER. Excluding land sales, the
   five main property types all saw positive equal-weighted price gains in the
   third quarter of 2023. However, the gains were not consistent across markets
   or property quality. The Prime Markets Indices within each property sector,
   which are dominated by the large, core, coastal metros, fell in unison during
   the 12-month period that ended in September 2023. For the first time since
   the first quarter of 2011, negative year-over-year price growth in prime
   markets confirms that commercial property price declines have become
   broad-based across property segments.
 * INDUSTRIAL INDICES SHOWING MIXED GROWTH. The equal-weighted U.S. Industrial
   Index gained 2.4% over the prior quarter but logged its fourth consecutive
   quarter of declines in the value-weighted segment, which fell 0.9%. Compared
   to the third quarter of 2022, the value-weighted segment was 6.3% softer in
   the third quarter of 2023 despite the equal-weighted pricing surge, up 2.9%
   over the prior year. Prime Industrial Metros are moving in line with the U.S.
   value-weighted segment, edging 1.9% lower than the prior quarter and 0.3%
   below levels seen in the third quarter of 2022.
 * MULTIFAMILY VALUES LEAPT HIGHER IN PRIMARY MARKETS. Prime Multifamily Metros
   saw a 2.3% increase in pricing compared to the second quarter of 2023. Prime
   Markets outperformed the U.S. Multifamily Index, which advanced by 2% over
   the prior quarter. The abundance of fixed-rate multifamily debt from agencies
   and bank lenders helped goose prices as the yields on benchmark rates moved
   sharply lower in the first half of 2023. The value-weighted U.S. Multifamily
   Index clawed back 90 basis points of value loss compared to the second
   quarter of 2023. Over the prior year, value-weighted Multifamily values
   dropped 15.7% compared to the third quarter of 2022.
 * PRIME OFFICE CONTINUED TO STRUGGLE IN THE THIRD QUARTER. The U.S. Prime
   Office Index fell 1.6% in the third quarter of 2023 compared to the second
   quarter of 2023, taking its cumulative decline to negative 15.3% since the
   fourth quarter of 2022 and down 10% over the prior year. Equal-weighted
   Office Index pricing fared better in the third quarter of 2023, rising 1.9%
   over the previous quarter. Despite still being down by 3.8% from the third
   quarter of 2022, the equal-weight Office Index managed to reverse some of the
   losses seen in the second quarter of 2023.
 * PRIME RETAIL PRICING PICKED UP AFTER THREE DOWN QUARTERS. The U.S. Prime
   Retail Index rose 2.3% in the third quarter after trending lower since the
   fourth quarter of 2022. The equal-weighted Retail Index also advanced 1.3% in
   the third quarter while gaining 1.1% since the third quarter of 2022. Like
   the other property types, the value-weighted Index showed pricing weakness
   and fell 0.4% during the third quarter. Pricing also dipped 2.4% among the
   higher-quality assets compared to the third quarter of 2022.
 * U.S. HOSPITALITY INDEX MARCHED HIGHER. The U.S. Hospitality Index was up 4%
   in the third quarter of 2023, contributing to annual gains of 6% in the
   12-month period ending in September 2023. The U.S. Hospitality Index was
   33.6% above its pre-recession peak in the third quarter of 2023.
 * THE U.S. LAND INDEX RESPONDED TO FALLING CONSTRUCTION STARTS. For the second
   quarter in a row, the U.S. Land Index declined, this time by 2% in the third
   quarter of 2023. Annual gains are also descending rapidly, going from a
   12-month gain of 15.1% in the third quarter of 2022, to flat at just 0.2% in
   the third quarter of 2023.






QUARTERLY CCRSI REGIONAL RESULTS

 * INDUSTRIAL AND RETAIL LED ANNUAL PRICE GAINS IN THE SOUTH. The four property
   types within each of the four regions produce 16 total property-type regions.
   Out of 16 subcategories, 14 property-type regions showed flat or negative
   price changes in the third quarter of 2023 compared to the third quarter of
   2022. The equal-weighted South Composite Index’s annual gains were led by
   industrial at 6.3% over the prior 12-month period ending in September 2023,
   while retail grew at 4.1%. The South Office Index fell 1.9% over the prior
   year, while multifamily sank 3.7% compared to the third quarter of 2022. When
   pitted against the prior quarter, however, industrial pricing expanded by
   2.1%, and retail and multifamily each gained 1.1% in value. The South Office
   sector was alone in its descent at -2.4% price growth compared to the second
   quarter of 2023. In the aggregate, the equal-weighted South Composite region
   shuffled sideways, with a 0.2% gain over the prior quarter and a 0.5% loss
   over the prior year. The value-weighted South Composite Index, on the other
   hand, slid 2.2% over the prior quarter and 12.5% below the third quarter of
   2022.
 * NORTHEAST OFFICE FALLS UNDER PRESSURE. The equal-weighted Northeast Composite
   Index rose 1.8% in the third quarter of 2023 over the prior quarter, which
   helped offset annual losses, with the index falling 4.9% compared to the
   12-month period ending in 2022. The value-weighted Northeast Composite Index
   fared better, posting a 1.9% gain over the prior quarter and a 5.1% upsurge
   over the third quarter of 2022. The equal-weighted Northeast Office Index
   stood out with a 12.6% decline in the 12-month period ending in September
   2023, the worst-performing property-type region in the third quarter. All
   four property types fell in the third quarter compared to the year prior,
   with multifamily at -4.9%, retail at -2%, and industrial at -1.2%. Despite
   the long-term trend lower, the third quarter will be either a head-fake
   bounce or the beginning of a bottoming price formation. When juxtaposed
   against the second quarter of 2023, all four property types posted positive
   price growth, with retail and multifamily expanding by 1.8%, office rising
   1.8%, and industrial footing 0.4% higher.
 * OFFICE AND INDUSTRIAL GIRDED MIDWEST PRICE DECLINES. On an annual basis, the
   equal-weighted Midwest Composite Index fell 1.2%, while the quarterly
   performance shot 2.4% higher compared to the second quarter of 2023. All four
   property types displayed negative year-over-year price action compared to the
   third quarter of 2022. Measured against this time last year, the Midwest
   Multifamily Index tumbled 9.4%, Midwest Office fell 3.1%, Midwest Retail slid
   0.4%, and Midwest Industrial stepped 0.1% lower. Conversely, the quarterly
   pricing increase seen in the industrial and office segments provided an
   optimistic increase. The Midwest Industrial Index added another 2.1% to last
   quarter’s 2.9% growth, while the Midwest Office segment rose by 1.9% in the
   third quarter of 2023. Midwest Retail lost 0.7% of its value and performed
   better than the Midwest Multifamily segment, which fell 2.2% in the quarter.
 * INDUSTRIAL AND RETAIL LED ANNUAL PRICE GAINS IN THE SOUTH. The four property
   types within each of the four regions produce 16 total property-type regions.
   Out of 16 subcategories, 14 property-type regions showed flat or negative
   price changes compared to the third quarter of 2022. The equal-weighted South
   Composite Index’s annual gains were led by industrial at 6.3% over the prior
   12-month period, while retail grew at 4.1%. The South Office Index fell 1.9%
   over the prior year, while multifamily sank 3.7% compared to the third
   quarter of 2022. When pitted against the prior quarter, however, industrial
   pricing expanded by 2.1%, and retail and multifamily each gained 1.1% in
   value. The South Office sector was alone in its descent at negative 2.4%
   price growth compared to the second quarter of 2023. In the aggregate, the
   equal-weighted South Composite region shuffled sideways, with a 0.2% gain
   over the prior quarter and a 0.5% loss over the prior year. The
   value-weighted South Composite Index, on the other hand, slid 2.2% over the
   prior quarter and 12.5% below the third quarter of 2022.
 * PRICING TRENDED LOWER IN THE WEST. Among the equal-weighted West Composite
   Indices, the quarterly price decline was negligible, with a 0.1% loss, at the
   same time giving up 0.9% over the prior year. Quarter-over-quarter pricing in
   the value-weighted Index swung 2.2% higher in the third quarter of 2023 and
   helped limit the 8.9% value erosion experienced since the third quarter of
   2022. After several quarters of price declines, the West Multifamily segment
   popped 2.2% higher over the prior quarter, but it was not enough to offset
   the 7.8% loss when compared to the third quarter of 2022. The West’s Office
   and Retail segments both gave back 3.3% of value over the 12-month period
   ending in September 2023 while showing positive performance over the prior
   quarter. The West Office segment managed to spike 2.3% higher in the third
   quarter, while the West Retail sector footed 0.3% above the second quarter of
   2023. The West Industrial Index was flat over the trailing 12-month period,
   with a 1.2% gain compared to the second quarter of 2023.














ABOUT THE COSTAR COMMERCIAL REPEAT-SALE INDICES

The CoStar Commercial Repeat-Sale Indices (CCRSI) are the most comprehensive and
accurate measures of commercial real estate prices in the United States. In
addition to the national Composite Index (presented in both equal-weighted and
value-weighted versions), national Investment-Grade Index, and national General
Commercial Index, which are reported monthly, 30 sub-indices in the CoStar index
family are reported quarterly. The sub-indices include breakdowns by property
sector (office, industrial, retail, multifamily, hospitality, and land), by
region of the country (Northeast, South, Midwest, and West), by transaction size
and quality (general commercial, investment-grade), and by market size
(composite index of the prime market areas in the country). The CoStar indices
are constructed using a repeat sales methodology, widely considered the most
accurate measure of price changes for real estate. This methodology measures the
movement in the prices of commercial properties by collecting data on actual
transaction prices. When a property is sold more than once, a sales pair is
created. The prices from the first and second sales are then used to calculate
price movement for the property. The aggregated price changes from all the sales
pairs are used to create a price index. Historical price indices are revised as
new data is recorded.






MEDIA CONTACT:

Matthew Blocher, Vice President, Marketing & Communications, CoStar Group
(mblocher@costar.com).

For more information about the CCRSI Indices, including the full accompanying
data set and research methodology, legal notices, and disclaimer, please
visit https://costargroup.com/costar-news/ccrsi/.

 


ABOUT COSTAR GROUP, INC.

CoStar Group, Inc. (NASDAQ: CSGP) is a leading provider of online real estate
marketplaces, information, and analytics. Founded in 1987, CoStar conducts
expansive, ongoing research to produce and maintain the largest and most
comprehensive database of commercial real estate information. Our suite of
online services enables clients to analyze, interpret, and gain unmatched
insight on commercial property values, market conditions and current
availabilities. STR provides premium data benchmarking, analytics, and
marketplace insights for the global hospitality industry. Ten-X provides a
leading platform for conducting commercial real estate online auctions and
negotiated bids. LoopNet is the most heavily trafficked commercial real estate
marketplace online. Apartments.com, ApartmentFinder.com, ForRent.com,
ApartmentHomeLiving.com, Westside Rentals, AFTER55.com, CorporateHousing.com,
ForRentUniversity.com and Apartamentos.com form the premier online apartment
resource for renters seeking great apartment homes and provide property managers
and owners a proven platform for marketing their properties. Homesnap is an
industry-leading online and mobile software platform that provides user-friendly
applications to optimize residential real estate agent workflow and reinforce
the agent-client relationship. Homes.com offers real estate professionals
advertising and marketing services for residential properties. Realla is the
UK’s most comprehensive commercial property digital marketplace. BureauxLocaux
is one of the largest specialized property portals for buying and leasing
commercial real estate in France. CoStar Group’s websites attract tens of
millions of unique monthly visitors. Headquartered in Washington, DC, CoStar
Group maintains offices throughout the U.S., Europe, Canada, and Asia. From time
to time we plan to utilize our corporate website, www.costargroup.com, as a
channel of distribution for material company information. For more information,
visit www.CoStarGroup.com

888-226-7404
1331 L Street, NW
Washington, DC 20005

CoStar Group, Inc. (NASDAQ: CSGP) is commercial real estate's leading provider
of information, analytics and online marketplaces.

888-226-7404
1331 L Street, NW
Washington, DC 20005

CoStar Group, Inc. (NASDAQ: CSGP)
is commercial real estate's leading
provider of information, analytics
and online marketplaces.

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