Steady price growth at the lower end of the commercial property market helped offset a slowdown at the top, according to CoStar Group's index.
The value-weighted U.S. Composite Index, which reflects larger asset sales common in core markets, fell 0.9% in January 2017, while posting an annual gain of 5.2% in the 12 months ending in January 2017.
Meanwhile the equal-weighted U.S. Composite Index, which reflects the more numerous but lower-priced property sales typical of secondary and tertiary markets, advanced by a stronger 1.4% in the month of January 2017 and 7.5% for the 12 months ending in January 2017.
Recent pricing trends in the CCRSI’s composite indices were mirrored in the two sub-indices of the equal-weighted Composite Index. The General Commercial segment, which is largely influenced by smaller, lower-priced properties, increased 1.4% in January 2017 and 8.5% for the 12 months ending in January 2017.
Meanwhile, the Investment-Grade segment, which is largely influenced by the sale of higher-value properties, fell 0.2% in January 2017 and gained only 1.6% in the 12 months ending in January 2017. The recent momentum in the General Commercial segment demonstrates the breadth of the pricing recovery as more investors seek out smaller properties in more secondary and tertiary markets.
According to Costar, the commercial real estate sector's liquidity levels are healthy. The average time on the market for for-sale properties dropped 12.9% in the 12 months ending in January 2017, although the rate for the month of January 2017 remained unchanged from December 2016 levels. The sale-price-to-asking-price ratio narrowed by 3.8 percentage points to 97.3%, the tightest this ratio has been since 2006. Meanwhile, the share of properties withdrawn from the market by discouraged sellers receded by 5.7 percentage points to 26.1% during the 12 months ending in January 2017.
The CoStar Commercial Repeat Sale Indices (CCRSI) provides the market's first look at commercial real estate pricing trends through January 2017. Based on 1,165 repeat sale pairs in January 2017 and more than 174,000 repeat sales since 1996, the CCRSI offers the broadest measure of commercial real estate repeat sales activity.