CCRSI RELEASE DECEMBER 2012 (With data through October 2012) COMMERCIAL PROPERTY PRICES SHOW LITTLE MOVEMENT IN OCTOBER AMID ECONOMIC UNCERTAINTY ADVANCES IN INVESTMENT GRADE INDEX FUELED BY SEASONAL SURGE This month's CoStar Commercial Repeat Sale Indices (CCRSI) provide the market's first look at October 2012 commercial real estate pricing. Based on 927 repeat sales in October and more than 100,000 repeat sales since 1996, the CCRSI offers the broadest measure of commercial real estate repeat sales activity. October 2012 CCRSI National Results Highlights OCTOBER PRICES SHOW LITTLE MOVEMENT: The two broadest measures of aggregate pricing for commercial properties within the CCRSI the equal-weighted U.S. Composite Index and the value-weighted U.S. Composite Index saw very little change in the month of October 2012, dipping -0.1% and -0.8%, respectively, although both improved over quarter and year-ago levels. Recent pricing fluctuations likely signify a more cautious attitude among investors stemming from uncertainty over U.S. fiscal policy heading into 2013. VALUE-WEIGHTED INDEX LIFTED BY MULTIFAMILY SECTOR: 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), fell slightly in October 2012, but this dip in pricing masks differences below the surface. The multifamily component of the index posted strong gains for the month, indicating continued investor interest in that property type as a safe haven investment. COSTAR COMMERCIAL REPEAT-SALE INDICES DECEMBER 2012 Release (With Data through October 2012)
Meanwhile, pricing for other property sectors served as a drag on the overall value-weighted index. WITHIN THE EQUAL-WEIGHTED INDEX, INVESTMENT GRADE SEGMENT CONTINUES TO BENEFIT FROM SEASONAL SURGE: October prices were up 15.8% in a quarterly comparison of the U.S. Investment Grade Index, reflecting a seasonal pricing pattern observed over the last several years in which investment-grade transaction activity tends to spike during the last few months of the year. In past years, the CCRSI Investment Grade index gave back some of those gains in the first quarter of the following year as deal volume slowed, a pattern expected to repeat itself in 2013. LIQUIDITY INDICATORS ARE IMPROVING: The average time on market for for-sale properties fell 5.5% from the peak in the second quarter of 2012. Similarly, the gap between initial asking and final sales price has closed by almost 2% from year-ago levels. Fewer properties withdrawn from the market by discouraged sellers is another indication of improving investor sentiment. The number of properties withdrawn from the market in October 2012 declined 7.4% from the prior year. DISTRESS LEVELS SEE SUBSTANTIAL DECLINE: The number of distressed property trades in October fell to 14.8%, the lowest level witnessed since the first quarter of 9. This reduction in distressed deal volume should result in higher, more consistent pricing, and lead to enhanced market liquidity, giving lenders more confidence to finance deals. Monthly CCRSI Results, Data through October of 2012 1 Month 1 Quarter 1 Year Trough to Current Value-Weighted U.S. Composite Index -0.8% 1.9% 6.1% 35.0% 1 Equal-Weighted U.S. Composite Index -0.1% 4.6% 5.9% 10.0% 2 U.S. Investment Grade Index 1.8% 15.8% 8.2% 28.7% 3 U.S. General Commercial Index -0.3% 3.0% 5.9% 8.2% 4 1 Trough Date: January, 2010 2 Trough Date: March, 2011 3 Trough Date: October, 9 4 Trough Date: March, 2011 Monthly Liquidity Indicators, Data through October of 2012 1 Current 1 Month 1 Quarter 1 Year Days on Market 410 418 431 422 Sale Price-to-Asking Price Ratio 86.3% 86.1% 85.8% 85.0% Withdrawal Rate 42.7% 43.9% 44.0% 50.1% 1 Average days on market and sale price-to-asking price ratio are both calculated based on listings that are closed and confirmed by CoStar s 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 October of 2012 225 U.S. Composite - Value Weighted U.S. Composite - Equal Weighted Index Value (0 Dec = 100) 175 150 125 100 75 50 25 0 1998 1999 0 1 2 3 4 5 6 7 8 9 2010 2011 2012 U.S. Composite Indices by Market Segment: Equal Weighted, Data through October of 2012 225 U.S. Investment Grade U.S. General Commercial Index Value (0 Dec = 100) 175 150 125 100 75 50 Market Liquidity Indicators, Data through October of 2012 25 0 1998 1999 0 1 2 3 4 5 6 7 8 9 2010 2011 2012
Days on Market Days On Market Sale Price-to-Asking Price Ratio Sale Price-to-Asking Price Ratio (%) 450 100% 98% 400 96% 94% 350 92% 90% 300 88% 86% 250 84% 82% 80% 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 U.S. Pair Count, Data through October of 2012 U.S. Pair Volume, Data through October of 2012 Number of Sale Pairs 1,400 1, 1,000 800 600 400 U.S. General Commercial Pair Count U.S. Investment Grade Pair Count 0 3 4 5 6 7 8 9 2010 2011 2012 Billions of Dollars $10 $9 $8 $7 $6 $5 $4 $3 $2 $1 U.S. General Commercial Pair Volume U.S. Investment Grade Pair Volume $0 3 4 5 6 7 8 9 2010 2011 2012
U.S. Distress Sale Pairs Percentage, Data through October of 2012 U.S. Investment Grade Distress Pair % U.S. General Commercial Distress Pair % 40% 35% 30% 25% 20% 15% 10% 5% 0% Jan-08 Apr-08 Jul-08 Distressed Sale Pairs as Percentage of Total 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 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 New York Orange County Prime Industrial Markets Atlanta Chicago Dallas Houston Northern New Jersey Riverside Seattle Prime Multifamily Markets Boston Chicago Houston
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, analytic services and marketing. 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 6.4 million registered members and 3.5 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 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 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 will not continue at the levels or with the trends indicated in this release; the possibility that recent pricing fluctuations are representative of something other than reaction to uncertainty over U.S. fiscal policy; the risk that investor interest in multifamily may change; the risk that the CCRSI Investment Grade index will not follow the expected pattern; the possibility that investor sentiment is not improving, or does not improve, as indicated by current trends; and the possibility that reduced distressed deal volume does not result in higher, more consistent pricing or lead to enhanced market liquidity and increased lender confidence. 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 September 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.