CCRSI RELEASE MARCH 2013 (With data through JANUARY 2013) COMMERCIAL REAL ESTATE PRICING LEVELS OFF FOLLOWING YEAR-END SURGE IN JANUARY INCREASING LIQUIDITY AND DECLINING DISTRESSED IMPROVING INVESTOR SENTIMENT SALES VOLUME SIGNAL This month's CoStar Commercial Repeat Sale Indices (CCRSI) provide the market's first look at January 2013 commercial real estate pricing. Based on 703 repeat sales in January 2013 and more than 100,000 repeat sales since 1996, the CCRSI offers the broadest measuree of commercial real estate repeat sales activity. COSTAR COMMERCIAL REPEAT-SALE INDICES MARCH 2013 Release (Withh Data through JANUARY 2013)
January 2013 CCRSI National Results Highlights COMPOSITE PRICE INDICES WERE MIXED IN JANUARY: 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), ticked up by 0.7% in January, and has now increased 38% from its trough in 2010. The U.S. Equal-Weighted Composite Index, which weights each repeat-sale by transaction equally (and therefore is heavily influenced by numerous smaller transactions), began 2013 with a 2.9% monthly loss, largely due to a seasonal slowdown in trading activities after the year-end sales surge. However, thanks to its steady recovery throughout 2012, the equal-weighted index has increased 5.5% since January 2012. BROAD MARKET REMAINS ON UPWARD PRICING TRAJECTORY DESPITE SEASONAL FLUCTUATION: Within the U.S. Equal-Weighted Composite Index, the Investment Grade segment gave back a portion of last year s pricing gains and contracted by 1.7% in January 2013. A similar seasonal adjustment in pricing levels has been observed in the first months of the past several years. Despite January s weaker performance, the Investment Grade Index remains slightly up from a year ago and has accumulated gains of more than 16% from its trough in 2009. The General Commercial Index also posted moderate losses in January 2013 but the segment is up 6.4% over January 2012, the best annual performance of the major price indices, reflecting an extension of the real estate market recovery to non-core markets and property types. LIQUIDITY INDICATORS ARE IMPROVING: Average time on market among for-sale properties declined 2.7% from its recent peak in the second quarter of 2012. Similarly, the gap between initial asking and final sales price has narrowed by almost 2.5% from year-ago levels and is now at the lowest level it has been since early 2009. Supported by a 40% annual increase in CRE lending activities in 2012, the disconnect between seller and buyer expectations is narrowing. Additionally, fewer properties are being withdrawn from the market by discouraged sellers, another indication of improving investor sentiment. The number of properties withdrawn from the market in January 2013 declined 12.1% from the same period in 2012. The improving liquidity reflected in these indicators is expected to continue to support asset price appreciation. DISTRESS CONTINUES TO MODERATE: Distressed sales as a percentage of total transactions have been following a declining trend since the start of 2011. Although this percentage ticked up in January 2013 due to the seasonal slowdown in total transactions, the number of repeat sales involving distress assets was the lowest in January 2013 since the summer of 2009. TRANSACTION VOLUME EDGES DOWN FROM PREVIOUS YEAR-END HIGHS: January 2013 sales volume declined as expected as the flurry of year-end 2012 deal making subsided. Repeat sale transaction volume totaled $3.1 billion in January 2013, approximately one-third of the previous month s volume. In addition to the seasonal slowdown in sales, looming tax rate changes likely pulled some transaction activity forward into 2012.
Monthly CCRSI Results, Data through January of 2013 1 Month 1 Quarter 1 Year Trough to Current Value Weighted U.S. Composite Index 0.7% 1.1% 4.8% 38.5% 1 Equal Weighted U.S. Composite Index 2.9% 0.6% 5.5% 9.0% 2 U.S. Investment Grade Index 1.7% 2.8% 1.0% 16.1% 3 U.S. General Commercial Index 3.2% 0.2% 6.4% 8.3% 4 1 Trough Date: January, 2010 2 Trough Date: March, 2011 3 Trough Date: October, 2009 4 Trough Date: March, 2011 Monthly Liquidity Indicators, Data through January of 2013 1 Current 1 Month 1 Quarter 1 Year Days on Market 422 420 421 430 Sale Price to Asking Price Ratio 86.9% 86.8% 86.2% 84.8% Withdrawal Rate 40.0% 40.9% 41.8% 52.2% 1 Average days on market and sale price to asking price ratio are both calculated based on listings that are closed and confirmed by the CoStar research team. Withdrawal rate is the ratio of listings that are withdrawn from the market by the seller relative to all listings for a given month.
U.S. Composite Indices: Equal- and Value-Weighted, Data through January of 2013 Index Value (2000 Dec = 100) 225 200 175 150 125 100 75 50 25 U.S. Composite Value Weighted U.S. Composite Equal Weighted 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 U.S. Equal-Weighted Indices by Market Segment, Data through January of 2013 225 200 U.S. Investment Grade U.S. General Commercial 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
Market Liquidity Indicators, Data through January of 2013 Days on Market 450 Days On Market Sale Price to Asking Price Ratio Sale Price to Asking Price Ratio (%) 100% 98% 400 96% 94% 350 92% 90% 300 88% 86% 250 84% 82% 200 Jan 07 May 07 Aug 07 Oct 07 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 80% U.S. Pair Count, Data through January of 2013 U.S. Pair Volume, Data through January of 2013 2,000 U.S. General Commercial Pair Count U.S. Investment Grade Pair Count $12 U.S. General Commercial Pair Volume U.S. Investment Grade Pair Volume 1,800 1,600 $10 Number of Sale Pairs 1,400 1,200 1,000 800 600 Billions of Dollars $8 $6 $4 400 200 $2 0 $0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
U.S. Distress Sale Pairs Percentage, Data through January of 2013 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 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 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 National Indices by Property Type Regional Indices All Properties Office Northeast General Commercial Investment Grade Retail Industrial Multifamily 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 Prime Office Markets CBSA Listed Alphabetically Boston Los Angeles New York Orange County San Francisco Seattle Washington DC Prime Industrial Markets CBSA Listed Alphabetically Atlanta Chicago Dallas Houston Los Angeles Northern New Jersey Riverside Seattle Prime Retail Markets CBSA Listed Alphabetically Boston Los Angeles New York Orange County Prime Multifamily Markets CBSA Listed Alphabetically Boston Chicago Houston Los Angeles
San Diego San Francisco San Jose Washington DC 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 http://www.costar.com/ccrsi. 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 6.7 million registered members. CoStar operates websites that have over 10 million unique monthly visitors in aggregate. 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 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 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; the possibility that increasing liquidity, declining distressed sales volume, and/or the reduction in the number of properties withdrawn from the market are not the result of, or do not result in, improving investor sentiment; the risk that improving liquidity does not continue to support asset price appreciation; and the possibility that the downward trend in distressed sales is not sustained. 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, 2012, under the heading "Risk Factors." 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.