Commercial Price Indices Post Increases After a Shaky First Half of the Year

Posted on August 29, 2016

he current expansion cycle seems to have staying power, as the three major CPPI indexes—including Moody’s/RCA, Green Street and CoStar—all either posted increases or remained stable during the summer months, after experiencing slight declines at the beginning of the year.

In June, the Moody’s/RCA all-property composite index moved up by 2.6 percent compared to the month before, with price increases in every major real estate sector, ranging from retail (with 0.8 percent) to apartment (with 2.3 percent) to office properties in Central Business Districts (CBDs) (with 6.8 percent).

The Commercial Repeat Sale Indices produced by research firm CoStar (CCRSI) also posted an increase in June, although the pace of growth in 2016 is in the single digits, in contrast to double-digit growth experienced in 2014 and 2015. CoStar reports that in June its value-weighted U.S. Composite Index, which looks at larger, prime assets, rose by 1.4 percent, while the equal-weighted U.S. Composite Index, which reflects the sales of smaller properties, rose by 1.3 percent. Compared to the first quarter, the two indices are up by 3.3 percent and 2.1 percent respectively.

The CPPI created by research firm Green Street Advisors stayed flat in July, but was still up 2 percent over a three-month period and up 6 percent for the 12 months leading up to July. The only sector that posted a slight decrease in prices, according to Green Street, was the apartment sector, with a decline of 1.0 percent for the month. Self-storage was the only sector to post an increase, with 2.0 percent.

The Moody’s/RCA index is based on repeat sales that took place two months prior to the publication of the report.

CoStar’s CCRSI is based on a repeat sales methodology as well, and measures the movement of prices based on actual transactions.

The Green Street CPPI tracks unleveraged commercial property values, based on prices at which real estate transactions are currently being negotiated and contracted.