Liquidity Indicators Beginning to Show a Wider Gap Between Buyer And Seller Expectations
CoStar recently released its monthly Commercial Repeat Sale Indices (CCRSI), providing the market’s first look at commercial real estate pricing trends through April 2020.
Based on 613 repeat sale pairs in April 2020 and more than 226,602 repeat sales since 1996, the CCRSI offers the broadest measure of commercial real estate repeat sales activity in the United States.
Highlights from the April 2020 CCRSI release include the following:
COMPOSITE INDICES SHOWED MODEST UPTICK IN APRIL 2020 AS DEALS INITIATED PRIOR TO COVID-19 CONTINUED TO BE CONSUMMATED, SUPPORTING MODEST PRICE GROWTH. The equal-weighted U.S. Composite Index, which reflects the more numerous but lower-priced property sales typical of secondary and tertiary markets increased 0.1%, while the value-weighted U.S. Composite Index, which reflects larger asset sales common in core markets, rose 0.5% in April 2020.
APRIL PRICE GROWTH WAS THE SLOWEST SO FAR IN 2020. While significant impact from COVID-19 has yet to be reflected in pricing, the monthly gain of 0.1% experienced in the equal-weighted composite index in April 2020 is down from the monthly average gain of 1.5% in the January through March 2020 period. The monthly gain of 0.5% in the value-weighted U.S. Composite Index is on par with monthly gains in the first quarter of 2020.
TRANSACTION VOLUME CONTINUED TO DECELERATE IN APRIL. Trade data lags somewhat, as deals reported in the weeks after month-end are still being tallied; however, sales volume through the first four months of the year in 2020 was down 7.5% as investor caution tamped down deal activity. The slowdown in deal volume is most evident in the General Commercial segment, with volume down 10% in the January to April period in 2020 compared with the same period in 2019, while the Investment Grade segment volume was down 6.3% year-over-year during the same period.
LIQUIDITY MEASURES SHOW GAP BETWEEN BUYERS AND SELLERS IS BEGINNING TO WIDEN. The average time on the market for for-sale properties increased to 202 days in April 2020, up from 201 days in March 2020 and 197 days in January 2020. This 2.4% increase over the four-month period is the most significant uptick in the average time on market indicator since 2012, when it rose 2.7% in March-June 2012. Meanwhile, the sale-price-to-asking-price ratio in April 2020 of 92.8% remained essentially unchanged from its average level throughout 2019 and into the first quarter of 2020. The share of properties withdrawn from the market by discouraged sellers also remained steady at 26.5% in April 2020.
To learn more about the data behind this article and what CoStar Group has to offer, visit https://www.costargroup.com/.
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