CCRSI RELEASE MARCH 2016 (With data through February 2016) COMMERCIAL PROPERTY PRICES REMAIN IN SLOWDOWN PATTERN AS MARKET REACTS TO INVESTOR PULLBACK DESPITE DECLINE IN PROPERTY PRICING, LEASING ACTIVITY REMAINED STRONG AS CRE MARKETS POST ROBUST ABSORPTION IN 16Q1 WASHINGTON March 30, 2016: This month's CoStar Commercial Repeat Sale Indices (CCRSI) provides the market's first look at February 2016 commercial real estate pricing. Based on 937 repeat sales in February 2016 and more than 155,000 repeat sales since 1996, the CCRSI offers the broadest measure of commercial real estate repeat sales activity. U.S. Composite Indices: Equal- And Value-Weighted, Data Through February 2016 225 U.S. Composite - Value Weighted U.S. Composite - Equal Weighted 200 Index Value (2000 Dec = 100) 175 150 125 100 75 50 25 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 COSTAR COMMERCIAL REPEAT-SALE INDICES MARCH 206 Release (With Data through FEBRUARY 2016)
U.S. Equal-Weighted Indices By Market Segment, Data Through February 2016 225 U.S. Investment Grade U.S. General Commercial 200 Index Value (2000 Dec = 100) 175 150 125 100 75 50 25 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 U.S. Pair Count, Data Through Feb. 2016 U.S. Pair Volume, Data Through Feb. 2016 2,500 U.S. General Commercial Pair Count U.S. Investment Grade Pair Count $25 U.S. General Commercial Pair Volume U.S. Investment Grade Pair Volume 2,000 $20 Number of Sale Pairs 1,500 1,000 Billions of Dollars $15 $10 500 $5 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 $0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
U.S. Distress Sale Pairs Percentage, Data Through February 2016 U.S. Investment Grade Distress Pair % U.S. General Commercial Distress Pair % Distressed Sale Pairs as Percentage of Total 40% 35% 30% 25% 20% 15% 10% 5% 0% Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Market Fundamentals, Data Through March 2016 General Commercial Net Absorption Rate 0.7% Investment Grade Net Absorption Rate 0.6% 0.5% Net Absorption as Percent of Stock 0.4% 0.3% 0.2% 0.1% 0.0% -0.1% -0.2% -0.3% Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16
CCRSI National Results Highlights BOTH EQUAL-WEIGHTED AND VALUE-WEIGHTED U.S. COMPOSITE INDICES DECLINED IN FEBRUARY 2016. The two broadest measures of aggregate pricing for commercial properties within the CCRSI the value-weighted U.S. Composite Index, which is heavily influenced by larger transactions, and the equal-weighted U.S. Composite Index, which is influenced by the more numerous smaller transactions declined by 0.6% and 0.8%, respectively, in February 2016 continuing the slowdown seen in January 2016. Despite the recent investor pullback, the pricing recovery already on the books has been substantial. The value-weighted U.S. Composite Index has exceeded its prerecession peak level by nearly 20%, while the equal-weighted U.S. Composite Index has moved to within 5% of its previous high water mark. INVESTMENT VOLUME ALSO COOLING FROM RECORD PACE SET IN 2015. Based on the U.S. pair count data compiled year-to-date through February 2016, the number of observed trades decreased 12.1% from the same period in 2015. The composite pair count fell 10% in the investment-grade segment and 12.6% in the general commercial segment in the first two months of 2016 compared with the first two months of 2015. LEASING REMAINED ROBUST IN FIRST QUARTER OF 2016. Demonstrating the overall health of CRE space markets, total net absorption of 155.1 million square feet across the three major property types office, retail, and industrial contributed to a total of 655.1 million square feet of net absorption for the 12 months ending in March 2016. That marks a 10.7% increase from the same period ending in March 2015. Investment-grade properties posted the strongest absorption growth rate over the last year. Net absorption in the investment-grade segment grew 14.8% in the 12 months ending in March 2016, while net absorption in the general commercial segment expanded by 1.9% in the same period. RECENT SLOWDOWN IN PRICE GROWTH SUGGESTS COMPOSITE INDICES MAY LEVEL OFF IN 2016. After steadily appreciating at a 1% average monthly increase over the past several years, the recent flatness in the CCRSI composite indices suggests the pace of CRE price growth may plateau in 2016. The ongoing economic expansion and limited supply growth this cycle have held vacancies near cyclical lows. Combined with healthy rent growth and investor demand, commercial property markets have turned in a remarkably strong performance. However, the return of global economic uncertainty and higher interest rates may begin to put upward pressure on cap rates and weigh on price growth in 2016.
Monthly CCRSI Results, Data Through February 2016 1 Month Earlier 1 Quarter Earlier 1 Year Earlier Trough To Current Value Weighted U.S. Composite Index 0.6% 0.6% 8.3% 89.6% 1 Equal Weighted U.S. Composite Index 0.8% 0.4% 8.6% 49.4% 2 U.S. Investment Grade Index 0.7% 0.5% 6.4% 63.6% 3 U.S. General Commercial Index 0.8% 0.4% 9.3% 48.4% 4 1 Trough Date: January 2010 2 Trough Date: March 2011 3 Trough Date: March 2010 4 Trough Date: March 2011 Market Fundamentals Data Through March 2016 Annual Net Absorption (In Millions Of Square Feet) 2013Q1 2014Q1 2015Q1 2016Q1 Aggregate 361.8 406.3 591.7 655.1 Investment Grade 265.3 290.6 403.4 463.2 General Commercial 96.5 115.7 188.3 191.9 Note: "Net Absorption" is the change in occupied space, calculated based on three types of properties: office, retail, and industrial. About the CoStar Commercial Repeat-Sale Indices The CoStar Commercial Repeat-Sale Indices (CCRSI) is the most comprehensive and accurate measure 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 we report monthly, we report quarterly on 30 sub-indices in the CoStar index family. The sub-indices include breakdowns by property sector (office, industrial, retail, multifamily, hospitality, and land), by region of the country (Northeast, South, Midwest, 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 one time, 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 of the sales pairs are used to create a price index.
National Composite CRE Price Index All Properties General Commercial Investment- Grade National Indices By Property Type Office Industrial Multifamily Regional Indices Northeast Midwest South West Regional Indices By Property Type Northeast: Office, Multifamily, Industrial, Midwest: Office, Multifamily, Industrial, South: Office, Multifamily, Industrial, West: Office, Multifamily, Industrial, Prime Market Indices By Property Type Office Multifamily Industrial Hospitality Land Prime Office Markets CBSA Listed Alphabetically Boston Los Angeles New York Orange County San Francisco Seattle Washington, D.C. Prime Industrial Markets CBSA Listed Alphabetically Atlanta Chicago Dallas Houston Los Angeles Northern New Jersey Riverside Seattle
Prime Markets CBSA Listed Alphabetically Boston Los Angeles New York Orange County San Diego San Francisco San Jose Washington, D.C. Prime Multifamily Markets CBSA Listed Alphabetically Boston Chicago Houston Los Angeles New York Orange County San Francisco San Jose Seattle Washington, D.C. MEDIA CONTACT: Keosha Burns, Director of Public Relations, CoStar Group (kburns@costargroup.com). For more information about the CCRSI Indices, including the full accompanying data set, research methodology, legal notices and disclaimer, please visit http://costargroup.com/costarnews/ccrsi. ABOUT COSTAR GROUP, INC. CoStar Group, Inc. (NASDAQ:CSGP) is the leading provider of commercial real estate information, analytics and online marketplaces. 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. LoopNet is the most heavily trafficked commercial real estate marketplace online with more than 10 million registered members. Apartments.com, ApartmentFinder.com and ApartmentHomeLiving.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. Through an exclusive partnership with Move, a subsidiary of News Corporation, Apartments.com is the exclusive provider of apartment community listings across Move s family of websites, which include realtor.com, doorsteps.com and move.com. CoStar Group s websites attracted an average of more than 22 million unique monthly visitors in aggregate throughout 2015. Headquartered in Washington, DC, CoStar maintains offices throughout the U.S. and in Europe and Toronto with a staff of approximately 2,600 worldwide, including the industry's largest professional research organization. For more information, visit www.costargroup.com.
This news release includes "forward-looking statements" including, without limitation, statements regarding CoStar's expectations, beliefs, intentions or strategies regarding the future. These statements are based upon current beliefs and are subject to many risks and uncertainties that could cause actual results to differ materially from these statements. The following factors, among others, could cause or contribute to such differences: the risk that the trends represented or implied by the indices will not continue or produce the results suggested by such trends; the risk that commercial real estate pricing levels, investment volumes, and net absorption growth rates do not continue at the levels or with the trends indicated in this release; the possibility that the slowing of commercial property price growth does not suggest plateauing levels for the remainder of 2016; and the possibility that global economic uncertainty and higher interest rates do not affect cap rates and price growth in 2016. More information about potential factors that could cause actual results to differ materially from those discussed in the forward-looking statements include, but are not limited to, those stated in CoStar's filings from time to time with the Securities and Exchange Commission, including in CoStar's Annual Report on Form 10-K for the year ended December 31, 2015, and Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, each of which is filed with the SEC, including in the "Risk Factors" section of those filings, as well as the company's other filings with the SEC available at the SEC's website (www.sec.gov). All forwardlooking statements are based on information available to CoStar on the date hereof, and CoStar assumes no obligation to update such statements, whether as a result of new information, future events or otherwise.