Saturday, September 24, 2011

Synchronicity: CRE Prices Increase Across the Board for 3 Months Running

Transaction Activity Remains Stable, General Commercial Sales Increase in Deal Size
September 14, 2011

For the first time since the downturn in 2008, the CoStar Commercial Repeat Sale Index (CCRSI) showed synchronized price increases across the board, from investment grade to general commercial, for more than three months, according to the latest release of the CoStar Commercial Repeat Sale Indices (CCRSI).

The consistent positive price movement in general commercial property sales ended the bifurcation trend observed in commercial real estate prices during the second half of last year. 

The monthly National Composite Index increased by 1% in July, 2011, the fourth consecutive month of positive price movement. 

In July, the price gain was 2.4% for the Investment Grade Index, and 0.7% for the General Commercial Index, and both marked the fourth month of increasing prices. 

CCRSI Index Results 

  • CoStar's Composite Commercial Repeat Sales Index increased by 1% in July 2011. It is now 1.6% below the same period last year and 33.1% below its peak in August 2007.

  • CoStar's Investment Grade Commercial Repeat Sales Index increased 2.4% in May 2011 and is now 6.8% above the same period last year and 32.4% below its peak in August 2007.

  • CoStar's General Grade Commercial Repeat Sales Index increased by 0.7% in May 2011, and is now 3.4% below its year-ago level and off 33.5% from its August 2007 peak.

The CCRSI September 2011 report is based on data through the end of July 2011. Transaction activity decreased slightly in July, with a total of 766 sale pairs compared with the monthly average of 834 in the last six months. 

A similar slowdown in transaction activities was observed in both the Investment Grade and the General Commercial indices. The former reported 120 sales pairs, down from its six-month average of 130, while the latter had 646 pairs, down from a monthly average of 704. The decrease appeared to be a normal monthly fluctuation. At the low point in the most recent downturn, only a total of 375 transactions were recorded in January 2009. 

Consistent with the decrease in pair counts, the overall dollar volume of sales also dropped slightly in July. While the average transaction size remained stable around $20 million for Investment Grade sale transactions, the average deal size for General Commercial transactions increased to $1.9 million, from an average of $1.6 million in the last six months. 

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NAI Rio Grande Valley is a focused commercial real estate brokerage, consulting, development and syndication firm serving the Rio Grande Valley and based in McAllen, Texas. Our mission is to transform real estate opportunities into profits for owners, users and investors.