CoStar recently released its monthly Commercial Repeat Sale Indices (CCRSI), providing the market’s first look at commercial real estate pricing trends through May 2020.
Based on 538 repeat sale pairs in May 2020 and more than 227,324 repeat sales since 1996, the CCRSI offers the broadest measure of commercial real estate repeat sales activity.
Highlights from the May 2020 CCRSI release include the following:
COMPOSITE PRICE INDICES FELL MODESTLY IN MAY AMID A CONTINUED SLOWDOWN IN TRANSACTION VOLUME. Both of CCRSI’s two major composite price indices declined in May 2020, reflecting investor uncertainty and slower deal volume. The equal-weighted U.S. Composite Index, which includes the more numerous but lower-priced property sales typical of secondary and tertiary markets, fell 1.3% in May 2020. The value-weighted U.S. Composite Index, which reflects larger asset sales common in core markets, declined by a more modest 0.1% in the month of May 2020. Both composite indices were still up between 3-5% in the 12-month period ending in May 2020.
SALES VOLUME CONTINUED TO DECLINE. Composite pair volume of $39.1 billion in the five-month period ending in May 2020 was down 24.2% from the five-month period ending in May 2019. While volume generally held up well in the first three months of 2020 compared to the same period during the prior year, volume dropped precipitously in April and May 2020, reflecting overall caution among investors, as well as physical challenges in transacting deals during lockdown. The deceleration in deal volume was felt across the size and building-quality spectrum, with repeat-sale transaction volume down 25.1% in the Investment Grade segment and 22.4% in the General Commercial segment in the first five months of 2020, compared to the same period in 2019.
THE RATE OF COMMERCIAL CONSTRUCTION DELIVERIES HAS SLOWED. Deliveries as a share of stock across three major property types — office, retail, and industrial — are projected to total 515 million SF in the 12-month period ending in June 2020, down 5.2% from the prior annual period, due in part to construction delays stemming from lockdown measures in some states. The downturn in deliveries is also due in part to the rate of construction completions going into the pandemic being much lower than at the peak of the last cycle in 2007-08. During the height of the last cycle, quarterly deliveries averaged 0.44% of total stock in 2007-08. In the last four quarters through June 2020, deliveries averaged just 0.23% of total inventory. More subdued construction levels going into a downturn may help to blunt the impact of weaker demand on vacancy rates.
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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