Development in Lower End of Home Markets Continues In spite of Decreases in Absorption, Offer Volume
The CoStar Commercial Repeat-Sale Index (CCRSI) ended this past summer season much as it started, with upward momentum in rates momentum for commercial real estate as both national composite indices advanced by a healthy margin for the 12-month period ending in August, owned by improving rate conditions for smaller, lower-end residential or commercial properties in markets across the United States
. The value-weighted U.S. Composite Index, which shows larger property sales typical in core markets, advanced 3.5% in August from a year earlier while the equal-weighted U.S. Composite Index, reflecting lower-priced home sales normal in secondary and tertiary markets, increased by a solid 16.5%.
Within the robust equal-weighted index, the General Commercial segment made up mostly of smaller sized, lower-priced properties, increased just under 20%, one of the highest yearly gains on record within the CCRSI, as financiers pursued smaller homes across a larger variety of markets. The Investment-Grade sub index, influenced by higher-value property deals, increased 7.6% from the previous year in August.Click to Expand. Story Continues Listed below
The pricing indices continue to see growth in the face of slowing absorption and deal volume. Net absorption rate as a share of total market inventory has slowed from prior years, according to an analysis by CoStar of initial third-quarter net absorption data.
Workplace, retail, and commercial saw a 0.2% net absorption rate in the first 3 quarters of 2017, below an average rate of 0.4% seen from 2015-2016, most likely due in part to a boost in new supply.
U.S. net absorption is projected to overall 493.8 million square feet throughout the 3 property types for the 12-month duration ending in September, still at roughly 2013 levels. While composite pair sales decreased 1.6% from the previous 12-month duration to $130.2 billion, 2017 continues to log some of the highest yearly transaction volume amounts to on record for the CCRSI.
Deal activity continued to take advantage of traditionally low rate of interest, though financier concerns over concentration danger and peak pricing levels in some markets and property types could be adding to the slowing of repeat-sale trading volume.
Commercial property transaction activity has actually continued to take advantage of a low-interest-rate environment. However, investor concerns over concentration danger and peak prices in some markets and property types may be adding to slower repeat sale trading volume.