COMMERCIAL REAL ESTATE PRICING LEAPS FORWARD IN AUGUST BOOSTED BY STRONG NET ABSORPTION IN FIRST HALF OF YEAR

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1 CCRSI RELEASE OCTOBER 2012 (With data through AUGUST 2012) COMMERCIAL REAL ESTATE PRICING LEAPS FORWARD IN AUGUST BOOSTED BY STRONG NET ABSORPTION IN FIRST HALF OF YEAR CCRSI INDICES POST STRONGEST GAINS SINCE DOWNTURN, BUT UNCERTAINTY LOOMS AS MARKET FUNDAMENTALS SOFTEN This month's CoStar Commercial Repeat Sale Indices (CCRSI) provide the market's first look at August 2012 commercial real estate pricing. Based on 878 repeat sales in August 2012 and more than 100,000 repeat sales since 1996, the CCRSI offers the broadest measure of commercial real estate repeat sales activity.

2 October 2012 CCRSI National Results Highlights PRICE RECOVERY ACCELERATES ACROSS THE BOARD: The two broadest measures of aggregate pricing for commercial properties within the CCRSI the U.S. Value-Weighted Composite Index and the U.S. Equal-Weighted Composite Index each posted significant gains in August The two components of the equal-weighted U.S. Composite Index (Investment Grade and General Commercial) both advanced in August, signifying that the recovery in property pricing has reached across all size and quality dimensions of the commercial real estate sector. VALUE-WEIGHTED INDEX REACHES HIGHEST MARK IN 3+ YEARS: The U.S. Value-Weighted Composite Index, which weights each repeat-sale by transaction size or value and therefore is heavily influenced by larger transactions, reached its highest level since early It has now improved by a cumulative 34.1% since the start of 2010, reflecting strong investor demand for primary gateway metro areas and institutional-grade multifamily assets that have been at the forefront of the pricing recovery for commercial property. EQUAL-WEIGHTED INDEX POSTS BIGGEST GAIN IN SIX YEARS: The rate of improvement in the U.S. Equal-Weighted Composite Index, which weights each repeat-sale equally and therefore reflects the influence of the more numerous smaller transactions, has accelerated. The 7.6% year-over year increase of the Equal-Weighted Composite Index in August 2012 was the largest such gain since August Despite the increase, cumulative gains in the Equal-Weighted Index have lagged behind those in the Value-Weighted Index, reflecting a slower rate of recovery of tenant demand in the General Commercial segment. PRICING UNCERTAINTY LOOMS AS ABSORPTION PULLS BACK: Aggregate net absorption of available space for three major property types office, retail, and industrial slowed during the third quarter of 2012 to less than one third of levels in the second quarter of 2012 and less than half of that in the first quarter of this year. The slowdown in leasing activity stems mainly from negative absorption in the General Commercial segment. Should this drawback in tenant demand be sustained by further macroeconomic weakness, near-term transaction volume and pricing could suffer. DISTRESS SALES CONTINUE TO DECLINE: The percentage of commercial property selling at distressed prices in August 2012 was the lowest since mid-2009.

3 Monthly CCRSI Results, Data through August Month Earlier 1 Quarter Earlier 1 Year Earlier Trough to Current Value-Weighted U.S. Composite Index 1.6% 4.1% 11.4% 34.6% 1 Equal-Weighted U.S. Composite Index 4.0% 4.1% 7.6% 8.2% 2 U.S. Investment Grade Index 8.5% 8.5% 9.8% 16.7% 3 U.S. General Commercial Index 3.0% 3.2% 7.2% 7.4% 4 1 Trough Date: January, Trough Date: March, Trough Date: October, Trough Date: March, 2011 Monthly Fundamentals, Data through September 2012 Net Absorption (in millions of square feet) Q1 2012Q2 2012Q3 Aggregate Investment Grade General Commercial (7.9) Note: "Net Absorption" is the change in occupied space, calculated based on three types of properties: office, retail, and industrial. U.S. Composite Indices: Equal- and Value-Weighted, Data through August of U.S. Composite - Value Weighted U.S. Composite - Equal Weighted Index Value (2000 Dec = 100)

4 U.S. Equal-Weighted Indices by Market Segment, Data through August of 2012 Index Value (2000 Dec = 100) U.S. Investment Grade U.S. General Commercial Market Fundamentals, Data through September of % General Commercial Net Absorption Rate Investment Grade Net Absorption Rate 0.6% 0.5% 0.4% Net Absorption as Percent of Stock 0.3% 0.2% 0.1% 0.0% -0.1% -0.2% -0.3% -0.4% Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12

5 U.S. Pair Count, Data through August of 2012 U.S. Pair Volume, Data through August of ,400 U.S. General Commercial Pair Count U.S. Investment Grade Pair Count $10 U.S. General Commercial Pair Volume U.S. Investment Grade Pair Volume Number of Sale Pairs 1,200 1, Billions of Dollars $9 $8 $7 $6 $5 $4 $ $2 $1 $ U.S. Distress Sale Pairs Percentage, Data through August of % U.S. Investment Grade Distress Pair % U.S. General Commercial Distress Pair % Distressed Sale Pairs as Percentage of Total 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 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 we report monthly, we

6 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 the same 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 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 Retail Industrial Multifamily Regional Indices Northeast Midwest South West Regional Indices by Property Type Northeast: Office, Multifamily, Industrial, Retail Midwest: Office, Multifamily, Industrial, Retail South: Office, Multifamily, Industrial, Retail West: Office, Multifamily, Industrial, Retail Prime Market Indices by Property Type Office Multifamily Industrial Retail Hospitality Land

7 Prime Office Markets CBSA Listed Alphabetically Boston Los Angeles New York Orange County San Francisco Seattle Washington DC Prime Retail Markets CBSA Listed Alphabetically Boston Los Angeles New York Orange County San Diego San Francisco San Jose Washington DC Prime Industrial Markets CBSA Listed Alphabetically Atlanta Chicago Dallas Houston Los Angeles Northern New Jersey Riverside Seattle Prime Multifamily Markets CBSA Listed Alphabetically Boston Chicago Houston Los Angeles New York Orange County San Francisco San Jose Seattle Washington DC CONTACT: For more information about CCRSI Indices, including our legal notices and disclaimer, please visit ABOUT COSTAR GROUP, INC. CoStar Group (Nasdaq:CSGP) is commercial real estate's leading provider of information, analytics and marketing services. 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. Through LoopNet, the Company operates the most heavily trafficked commercial real estate marketplace online with more than 6.1 million registered members and 3.6 million unique monthly visitors. Headquartered in Washington, DC, CoStar maintains offices throughout the U.S. and in Europe, including the industry's largest professional research organization. For more information, visit

8 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 investor demand and commercial real estate pricing levels will not continue at the levels or with the trends indicated in this release; and the risk that there could be a sustained slowdown in leasing activity and that such slowdown could have consequences that differ from those stated in this release. 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 CoStar's Annual Report on Form 10-K for the year ended December 31, 2011, and CoStar's Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, under the heading "Risk Factors" in each of these filings. All forward-looking 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.