CCRSI RELEASE APRIL 2014 (With data through FEBRUARY 2014) PRICE MOMENTUM FOR COMMERCIAL REAL ESTATE CONTINUED TO BUILD IN FEBRUARY REFLECTING BROAD RECOVERY IN MARKET FUNDAMENTALS AND PRICING, EQUAL-WEIGHTED CCRSI INDEX POSTS STRONGEST YEAR-OVER-YEAR GAIN SINCE BEGINNING OF RECOVERY This month's CoStar Commercial Repeat Sale Indices (CCRSI) provide the market's first look at February 2014 commercial real estate pricing. Based on 1,028 repeat sales in February 2014 and more than 125,000 repeat sales since 1996, the CCRSI offers the broadest measure of commercial real estate repeat sales activity.
FEBRUARY 2014 CCRSI National Results Highlights COMMERCIAL REAL ESTATE PRICES REGISTER BROAD GAINS IN FEBRUARY: The two broadest measures of aggregate pricing for commercial properties within the CCRSI the valueweighted U.S. Composite Index and the equal-weighted U.S. Composite Index gained 1.1% and 1.7%, respectively, in February 2014. Both reached double-digit growth over the previous 12-month period as the pricing recovery extended to smaller markets and secondary property types. VALUE-WEIGHTED U.S. COMPOSITE INDEX HAS RECOVERED TO WITHIN 5% OF ITS PRE- RECESSION PEAK: The value-weighted U.S. Composite Index is more heavily influenced by highvalue trades, where pricing has skyrocketed over the last two years. As a result, this CCRSI index has reached levels not seen since early 2008. Meanwhile, the equal-weighted U.S. Composite Index, which is more heavily influenced by lower-value trades, remained 22.3% below its prior peak. PRICING FOR LOW-END PROPERTIES GAINING MOMENTUM: Although still below its previous peak, the equal-weighted U.S. Composite Index, which generally reflects the performance of smaller deals more typical of secondary and tertiary markets, made its strongest annual gain in February 2014 since the current recovery began. It advanced by 15.7% over the last 12 months as investors continued to expand their buying activity in non-prime markets. The momentum shift to lower quality and smaller properties also appeared in the recent growth of the General Commercial segment, which grew by a similar 15.7% over the previous year, while its Investment Grade counterpart advanced by 15%. STRONGER ABSORPTION TRENDS BOLSTERING PRICING GAINS: For the 12-month period from March 2013 through March 2014, net absorption across the three major property types office, retail and industrial totaled 378.2 million square feet, a 15.3% increase from the prior 12-month period. Consistent with recent pricing trends, net absorption in the General Commercial segment rose 48% during the same period, compared with a 5% annual gain for the same period in the Investment Grade segment. INDUSTRIAL AND OFFICE SECTORS STAGE STRONGEST ABSORPTION GAINS OVER PAST 12 MONTHS: The industrial property sector experienced positive absorption across the entire size spectrum, and even the smallest buildings (less than 25,000 SF) have had tenant move-ins. In the office sector, suburban properties less than 75% of total office inventory accounted for 90% of absorption growth for the 12-month period from March 2013 through March 2014. This strong growth in suburban office demand largely stemmed from industries such as technology that have experienced rapid growth recently. Meanwhile, slower-growth industries such as finance, legal and government dominate most central business district office markets. FIRST QUARTER INVESTMENT ACTIVITY FOLLOWS HISTORICAL PATTERN: Commercial property sales activity during the first quarter typically declines from the previous quarter by about one-third, and this pattern was evident again in 2014. However, despite the slowdown in sales volume from the previous year-end, transaction activity through February 2014 suggests that the year as a whole will be very active for commercial real estate investment. Composite pair volume of nearly $10 billion through the first two months of 2014 has already exceeded first quarter 2013 totals. DISTRESS SALES CONTINUE STEADY DECLINE: The percentage of commercial property selling at distressed prices has fallen by more than two-thirds from peak levels reached in 2011. Over the last three months, distress deals comprised just over 10% of composite pair trades.
Monthly CCRSI Results, Data through February of 2014 1 Month Earlier 1 Quarter Earlier 1 Year Earlier Trough to Current Value Weighted U.S. Composite Index 1.1% 1.2% 12.1% 54.5% 1 Equal Weighted U.S. Composite Index 1.7% 3.5% 15.7% 22.1% 2 U.S. Investment Grade Index 1.7% 4.0% 15.0% 35.5% 3 U.S. General Commercial Index 1.8% 3.5% 15.7% 20.4% 4 1 Trough Date: January, 2010 2 Trough Date: March, 2011 3 Trough Date: October, 2009 4 Trough Date: March, 2011 Market Fundamentals, Data through March of 2014 Annual Net Absorption (in millions of square feet) 2011Q1 2012Q1 2013Q1 2014Q1 Aggregate 232.0 292.8 328.1 378.2 Investment Grade 146.1 196.5 247.8 259.2 General Commercial 85.8 96.3 80.3 119.0 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 February of 2014 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 2014
U.S. Equal-Weighted Indices by Market Segment, Data through February of 2014 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 2014 Market Fundamentals, Data through March of 2014 Net Absorption as Percent of Stock 0.7% 0.6% 0.5% 0.4% 0.3% 0.2% 0.1% 0.0% 0.1% 0.2% General Commercial Net Absorption Rate Investment Grade Net Absorption Rate 0.3% Mar 07 Mar 08 Mar 09 Mar 10 Mar 11 Mar 12 Mar 13 Mar 14
U.S. Pair Count, Data through February of 2014 U.S. Pair Volume, Data through February of 2014 2,500 U.S. General Commercial Pair Count U.S. Investment Grade Pair Count $14 U.S. General Commercial Pair Volume U.S. Investment Grade Pair Volume 2,000 $12 Number of Sale Pairs 1,500 1,000 500 Billions of Dollars $10 $8 $6 $4 $2 0 $0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 U.S. Distress Sale Pairs Percentage, Data through February of 2014 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
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: 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 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 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 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 8 million registered members. Including Apartments.com, CoStar operates websites that have approximately 16 million unique monthly visitors in aggregate. Headquartered in Washington, DC, CoStar maintains offices throughout the U.S. and in Europe with a staff of over 2,300 worldwide, 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 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 and commercial real estate pricing levels will not continue at the levels or with the trends indicated in this release; the possibility that 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; 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 Form 10-K for the year ended December 31, 2013, under the heading "Risk Factors." All forward-looking 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.