Economy Watch: CRE Prices, Other Metrics Gain Ground

U.S. commercial real estate prices had strong gains in May, but transaction volume still remains lower than last year.
Credit: CoStar Group
Credit: CoStar Group

U.S. commercial real estate enjoyed solid price gains in May, coming on the heals of declines during the early part of the year, according to the latest CoStar Commercial Repeat Sales Indices (CCRSI), which were published on Thursday. The indices are based on 1,300 repeat property sales nationwide in May, and more than 160,000 such sales over almost 20 years, the company said.

The company’s value-weighted U.S. Composite Index and the equal-weighted U.S. Composite Index—two broad measures of commercial property sales prices—each increased by more than 1 percent in May. The indices experienced gains of 2.2 percent and 6.7 percent, respectively, for the 12 months ended May 2016.

Reflecting the broader financial market volatility from earlier in the year, transaction volume remains lower than last year’s record-setting pace, CoStar reports. Volume year-to-date through May 2016 was down 13.7 percent compared to the same period one year earlier. The slowdown was particularly noticeable in the investment-grade segment of the market.

Net absorption across the three major commercial property types—office, industrial and retail) totaled 688.5 million square feet for the 12 months ending in May 2016, a 9.5 percent rise from the same period in 2014-15. The general commercial segment, which reflects the performance of smaller properties, had the strongest rate of growth in absorption over the past year.