CCRSI RELEASE JANUARY 2014 (With data through NOVEMBER 2013) COMMERCIAL REAL ESTATE PRICES POST STEADY GAINS IN NOVEMBER STRONG ABSORPTION ACROSS PROPERTY TYPES SUPPORT BROAD GAINS IN PRICING This month's CoStar Commercial Repeat Sale Indices (CCRSI) provide the market's first look at November 2013 commercial real estate pricing trends. Based on 1,014 repeat sales in November 2013 and more than 125,000 repeat sales since 1996, the CCRSI offers the broadest measure of commercial real estate repeat sales activity. November 2013 CCRSI National Results Highlights COMMERCIAL PROPERTY PRICES CONTINUED THEIR STEADY UPWARD TRAJECTORY IN NOVEMBER: With the U.S. economy on more solid footing during the fourth quarter of 2013 and demand for commercial real estate space on the rise, pricing continued on a steady upward trajectory in November 2013. The two broadest measures of aggregate pricing for commercial properties within the CCRSI the value-weighted U.S. Composite Index and the equal-weighted U.S. Composite Index advanced by 0.8% and 1.1%, respectively in November 2013, and rose by a more robust 10.9% and 7.8%, respectively, over the last year. RECENT PRICING PERFORMANCE HAS BEEN STEADIER AT THE HIGH END OF THE MARKET: 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), has increased by a cumulative 51.9% since the start of 2010, reflecting steady demand for institutional-grade property assets in toptier metro areas that led the recovery. Recent performance in the U.S. Equal-Weighted Composite Index, which weights each repeat-sale equally and is more heavily influenced by smaller transactions, has been more volatile. The Index lost ground in the third quarter of 2013 as it was significantly more impacted by uncertainty concerning the economy and interest rates, but it has since rebounded. The Equal-Weighted Index has increased 18.4% from its trough in 2011. ABSORPTION EXPANDS AT FASTEST RATE SINCE 2007: Tenants occupied an additional 380 million square feet of office, retail and industrial space throughout the U.S. in 2013, the largest annual gain in net absorption over the past six years. The Investment Grade segment of the market continued to dominate in space absorption. However, the pace of absorption in the General Commercial segment has improved significantly as the recovery is accelerating in the secondary and tertiary markets. The General Commercial segment s share of total net absorption increased from being less than 30% for the last several years to 32% in 2013. DISTRESS SALES REMAIN LOW: The percentage of commercial property selling at distressed prices was slightly more than 13% in November 2013, down roughly two-thirds from the peak in 2011. Technology and energy-driven markets including Houston, Denver, Dallas, and Austin have experienced some of the strongest declines in the share of distress property sales activity over the last year, with a reduction of 80% or more. Monthly CCRSI Results, Data through November of 2013 1 Month Earlier 1 Quarter Earlier 1 Year Earlier Trough to Current Value Weighted U.S. Composite Index 0.8% 2.6% 10.9% 51.9% 1 Equal Weighted U.S. Composite Index 1.1% 2.0% 7.8% 18.4% 2 U.S. Investment Grade Index 0.8% 2.1% 13.6% 31.3% 3 U.S. General Commercial Index 1.3% 1.3% 6.8% 16.7% 4 1 Trough Date: January, 2010 2 Trough Date: March, 2011 3 Trough Date: October, 2009 4 Trough Date: March, 2011 Monthly Fundamentals, Data through December of 2013 Net Absorption (in millions of square feet) 2011 2012 2013 Aggregate 296.5 307.6 380.6 Investment Grade 209.8 221.7 259.8 General Commercial 86.7 85.9 120.8 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 November 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 November 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 Fundamentals, Data through December of 2013 0.7% 0.6% 0.5% General Commercial Net Absorption Rate Investment Grade Net Absorption Rate Net Absorption as Percent of Stock 0.4% 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 Mar 13 U.S. Pair Count, Data through November of 2013 U.S. Pair Volume, Data through November of 2013 2,500 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 2,000 $10 1,500 1,000 500 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Number of Sale Pairs $8 $6 $4 $2 $0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Billions of Dollars
U.S. Distress Sale Pairs Percentage, Data through November 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 Apr 13 Jul 13 Oct 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 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: Midwest: South: West: Prime Market Indices by Property Type Office Multifamily Industrial Retail Hospitality Land Prime Office Markets Boston New York Orange County San Francisco Seattle Washington DC Prime Retail Markets Boston Prime Industrial Markets Atlanta Chicago Dallas Houston Northern New Jersey Riverside Seattle Prime Multifamily Markets Boston
New York Orange County San Diego San Francisco San Jose Washington DC Chicago Houston New York Orange County San Francisco San Jose Seattle Washington DC CONTACT: For more information about the CCRSI Indices, including a detailed methodology, fact sheet, legal notices and disclaimer, and an archive of previous releases, please visit http://www.costar.com/ccrsi. ABOUT COSTAR GROUP, INC. CoStar Group (Nasdaq:CSGP) is the leading provider of commercial real estate 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 7.7 million registered members. CoStar operates websites that have approximately 9 million unique monthly visitors in aggregate. Headquartered in Washington, DC, CoStar maintains offices throughout the U.S. and in Europe with a staff of approximately 2,000 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 plans, objectives, expectations, beliefs, intentions or strategies regarding the future. These statements are based upon the current beliefs and expectations of management of CoStar 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, including the rise in demand for commercial real estate space, and commercial real estate pricing levels will not continue at the levels or with the trends indicated in this release; and the pace of absorption in the General Commercial segment and the recovery in the secondary and tertiary markets may not continue at the rates 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 Form 10-K for the year ended December 31, 2012, and CoStar's Quarterly Report on Form 10-Q for the quarter ended September 30, 2013, under the heading "Risk Factors." All forwardlooking statements are based on information available to CoStar on the date hereof, and CoStar does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.