CoStar’s repeat-sales indices are broken down into value-weighted segments, which reflect big sales often found in the largest markets, and equal-weighted indices, which reflect the more numerous but lower-priced sales in smaller areas. Both continued their march higher as tenants have returned to the market, taking more space than they are giving back.
The indices have now posted six consecutive months of price gains, indicating investors see relative safety in commercial real estate as an investment. And one key indicator of demand for commercial property is projected to reach its highest point in three years with a surge in net absorption, the total amount of space tenants physically moved into minus the total amount of space tenants vacated.
“Over the 12 months ending in September, net absorption in office, retail and industrial properties combined is expected to increase to 333.6 million square feet — the highest 12-month level we’ve seen in three years,” according to Christine Cooper, managing director and chief U.S. economist, for CoStar Group.
In contrast, amid the uncertainty created by the pandemic, net absorption for the 12-month period ending in September a year ago was negative 63.8 million square feet.
CoStar’s Equal-Weighted U.S. Composite Index is further broken down into two subindices, the general commercial segment, which is influenced by smaller, lower-priced properties, and the investment-grade segment, which is influenced by higher-value properties. Those indices showed mixed results in August.
Following a 2.5% gain in July, the largest monthly increase in nearly 12 months, the index for the investment-grade segment fell by 0.4%.
In contrast, the general commercial segment rose 1.3% after a smaller 0.6% increase in July.
For the first time in the history of CoStar’s repeat-sales indices, composite pair trades topped 20,000 for the 12-month period that ended in August. The number of transactions year to date is 66% higher than in the first eight months of 2020 and 29% higher than in the first eight months of 2019.
The latest indices are based on 1,849 repeat-sale pairs in August and more than 251,386 repeat sales since 1996.
Source: CoStar Group, www.costar.com