Economy Watch: CRE Prices Enjoy 2Q Growth

After experiencing only modest growth in the first quarter of 2016, mostly likely due to global economic jitters, both of CoStar's national composite price indices ended the second quarter of 2016 on a stronger note, the company reported.

After experiencing only modest growth in the first quarter of 2016, mostly likely due to global economic jitters, both of CoStar’s national composite price indices ended the second quarter of 2016 on a stronger note, the company reported on Friday. The value-weighted U.S. Composite Index, which is influenced by the sale of high-quality, larger assets, advanced by 3.3 percent for the quarter, while the equal-weighted U.S. Composite Index, which reflects the more numerous sales of smaller properties, rose 2.1 percent in Q2.

On the other hand, the year-over-year rate of increase has dropped into the single digits as of June 2016, compared with double-digit annual paces in the 12-month periods ending both in June 2014 and June 2015. That suggests the pace of price growth may continue to plateau in 2016 as the current cycle advances.

The company’s U.S. Multifamily Index expanded 1.8 percent in the second quarter of 2016 and 8.5 percent in the 12-month period ending in June 2016, making it (unsurprisingly) the strongest 12-month rate among the major property indices. While a large pipeline of new supply is beginning to exert pressure on multifamily market fundamentals nationally, vacancy rates remained relatively tight at 4.1 percent in Q2 2016, CoStar reports.

The U.S. Retail index rose 1.9 percent in the second quarter and 6.3 percent in the 12-month period ending in June 2016, edging past its prerecession peak by 0.7 percent. The U.S. Office Index increased 1.9 percent in Q2 2016 and 7.5 percent in the 12-month period ending in June 2016, as office rent growth and occupancy rates have nearly reached the previous market peak.