CoStar Repeat-Sale Indices Show Tightest Sale-to-Asking Price Ratio Since 2006, Led by Secondary Markets
Property sellers are in the best position in 15 years to get close to their desired asking price, according to the latest monthly CoStar commercial repeat-sale indices.
The sale-price-to-asking-price ratio in October narrowed by 2.3 percentage points to 94.6%, the tightest this figure has been since 2006.
Driving the dynamic is demand for income-producing commercial real estate, particularly in markets outside major cities, while buyers are staying away from underperforming properties.
“Sellers are achieving close to their asking prices in an environment of rising prices and short sales cycles,” said Christine Cooper, chief U.S. economist for CoStar Group and author of the monthly report. “This is especially true in secondary and tertiary markets that saw an influx of people working remotely and escaping dense, expensive urban areas.”
Steady price growth in secondary and tertiary markets such as Nashville, Tennessee, has outpaced price growth at the top end for the first time in four months, according to the indices. Price growth has slowed for the top properties in major markets such as New York, Chicago and Los Angeles.
And it is taking less time for sellers to get their desired price. The average number of days on the market for properties declined in October to 218.56 days, a drop of 0.8% over the month and the lowest it has been since July 2020.
Meanwhile, the number of properties withdrawn from the market by discouraged sellers receded by 5 percentage points to 22.6% during the 12-month period.
Large, Small Markets Gain
CoStar’s repeat-sales indices are broken into two segments: value-weighted that reflects big sales often found in the largest markets and equal-weighted that's made up of the more numerous but lower-priced sales in smaller areas. Both indices moved higher in October, but the equal-weighted U.S. composite index advanced at a stronger pace.
The equal-weighted index moved up 1.4% in October and was up 13.1% for the 12 months that ended in October. This index is now 17.9% above its pre-pandemic level.
Meanwhile, the value-weighted U.S. composite index edged 1% higher in October. That is the eighth consecutive month of growth but its third month of decelerating gains. The index was up 14.5% in the 12 months that ended in October, and it is now 14.5% higher than in February 2020, before the onset of the pandemic.
Investors in October also shunned troubled properties, according to the indices. Distressed repeat-sale trades fell for the third consecutive month.
About 1.3% of all repeat-sale trades were distressed in October, the third consecutive month this number has fallen and now at the lowest point since April 2020.
General commercial distressed sales in October measured just 1.2% of all repeat-sale trades, the smallest amount since April and below the five-year monthly average of 1.4%.
Investment-grade distressed sales accounted for 0.1% overall in October, the smallest figure on record going back to January 2008.
The latest indices are based on 1,822 sale pairs in October and more than 255,829 repeat sales since 1996.