APRIL 2012 CCRSI RELEASE (With data through February 2012) COMMERCIAL REAL ESTATE PRICES MIXED: GENERAL COMMERCIAL SECTOR GAINS MOMENTUM WHILE INVESTMENT GRADE SEES SEASONAL DIP SLOW BUT STABLE PRICING GROWTH IN GENERAL COMMERCIAL INDEX SIGNALING THAT THE RECOVERY IS BECOMING MORE BROAD-BASED This month's CoStar Commercial Repeat-Sale Indices (CCRSI) provide the market's first look at February 2012 commercial real estate pricing. Based on 704 repeat sales of commercial property in February and more than 100,000 repeat sales since 1996, the CCRSI offers the broadest measure of commercial real estate repeat sales activity. Also, in this release CoStar provides a closer look at the impact of real estate fundamentals on two different segments of the market. February 2012 National Results Highlights The U.S. Composite Index declined by 1.3% in February 2012 due to a dip in investment-grade pricing. Reflecting the February decline, the U.S. Composite Index remained 33.6% below its prerecession peak but 4.0% above the same period last year. In contrast to the monthly pricing decline in the Composite Index, the U.S. General Commercial Index was flat in February. This segment has shown more consistency and better performance than the Composite Index over the last 12 months. Since the beginning of the year, the General Commercial Index has advanced by 1.7% while the Composite Index remains unchanged. Consistent with seasonal patterns of recent years, the U.S. Investment Grade Index gave back a sizeable portion of last year s gains in the first two months of 2012. The Investment Grade Index
declined by 6.6% in February 2012, similar to the 5.6% contraction recorded for the same index in February 2011. This pricing reversal coincides with a seasonal slowdown in investment grade transaction activity, a trend observed in the first two months of each of the past three years. Despite the weak performance in February 2012, investment grade property prices have increased by 11.5% since their trough in late-2009 and still outperformed general commercial property prices. The relative performance of the General Commercial and Investment Grade indices is closely related to market fundamentals. Net absorption for the three major property types office, retail, and industrial has been positive in both market segments over the past eight quarters. However, for the greater part of two years, absorption has been stronger in the investment grade sector. It was not until recently that the general commercial properties moved ahead in demand growth, whereas the relative contribution of the higher end of the market to net absorption has diminished. (Please refer to the Market Fundamentals chart included in this month s release.) This in part explains the slower but more stable pricing growth in the General Commercial Index since the start of 2011. The increase in absorption among General Commercial properties also shows that the recovery is becoming more broad-based and therefore more stable and lasting. Monthly CCRSI Results as of February 29, 2012 1 Month Earlier 1 Quarter Earlier 1 Year Earlier Trough to Current U.S. Composite Index -1.3% -0.5% 4.0% 5.6% 1 U.S. Investment Grade Index -6.6% -9.9% 4.6% 11.5% 2 U.S. General Commercial Index -0.2% 1.3% 3.8% 4.9% 3 1 Trough Date: March, 2011 2 Trough Date: October, 2009 3 Trough Date: March, 2011
Index Value (2000 Dec = 100) 225 U.S. Composite U.S. Investment Grade U.S. General Commercial 200 175 150 125 100 75 50 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Market Fundamentals as of March 31, 2012 Contribution to Net Absorption Rate 2012 Q1 2011 2010 Investment Grade 35% 64% 66% General Commercial 65% 36% 34%
Net Absorption as Percent of Stock 0.7% 0.6% 0.5% 0.4% General Commercial Investment Grade 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
Number of Sale Pairs 1,400 General Commercial Pair Count Investment Grade Pair Count 1,200 1,000 800 600 400 200 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Billions of Dollars $10 $9 General Commercial Pair Volume Investment Grade Pair Volume $8 $7 $6 $5 $4 $3 $2 $1 $0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
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 Distressed Sale Pairs Percent of Total 40% Investment Grade General Commercial 35% 30% 25% 20% 15% 10% 5% 0% 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, 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 subindices 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 10 largest metropolitan 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 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 Top Ten Metro Market Indices by Property Type Office Multifamily Industrial Retail Hospitality Land Largest Office Metro Areas Largest Industrial Metro Areas # CBSA # CBSA 1 New York 1 Los Angeles 2 Los Angeles 2 New York 3 Washington 3 Chicago 4 Chicago 4 Dallas-Fort Worth 5 Dallas-Fort Worth 5 Atlanta 6 Boston 6 Detroit 7 San Francisco 7 Riverside 8 Atlanta 8 Houston 9 Philadelphia 9 Philadelphia 10 Houston 10 Miami-Fort Lauderdale Largest Retail Metro Areas Largest Multifamily Metro Areas # CBSA # CBSA
1 New York 1 New York 2 Los Angeles 2 Los Angeles 3 Chicago 3 Chicago 4 Dallas-Fort Worth 4 Dallas-Fort Worth 5 Miami-Fort Lauderdale 5 Washington 6 Atlanta 6 Houston 7 Houston 7 Boston 8 Philadelphia 8 Atlanta 9 Washington 9 Seattle 10 San Francisco 10 Philadelphia CONTACT: For more information about CCRSI Indices, including our legal notices and disclaimer, please visit http://www.costar.com/ccrsi. ABOUT COSTAR GROUP, INC. CoStar Group (Nasdaq:CSGP) is commercial real estate's leading provider of information and analytic 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. Headquartered in Washington, D.C., CoStar maintains offices throughout the U.S. and in Europe with a staff of approximately 1,500 worldwide, including the industry's largest professional research organization. For more information, visit http://www.costar.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 subject to many risks and uncertainties that could cause actual results to differ materially from these statements. 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 Form 10-K for the year ended December 31, 2011, under the heading "Risk Factors." In addition to these statements, there can be no assurance that the recovery is becoming more broad-based and therefore more stable and lasting; that investor demand and commercial real estate pricing levels will continue at the levels or with the trends indicated in this release; that the trends represented or implied by the indices will continue; and that the CCRSI will be released on the date and updated on the frequency set forth in the release. 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.