Deceleration In Multifamily Pricing Contributes To Slower Growth In Commercial Index

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The Editors's picture
Multifamily in the West commerical price index from CoStar

Multifamily was the slowest growing property type index in the first quarter of 2017, according to the CoStar Commerical Repeat Sales Indices.

The report says amid slower rent growth and heightened construction levels at the top end of the multifamily market, pricing in the Multifamily Index advanced 1.9% in the first quarter of 2017, a moderate deceleration from its quarterly average pace of 2.9% over 2015 and 2016, according to a release.

The U.S. Multifamily Index increased by 1.9% in the first quarter of 2017, the slowest rate among the major property types, although recent annual gains of 9.1% in the 12-month period ending in March 2017 are still healthy.

Meanwhile, the Prime Multifamily Metros Index growth decreased 0.3% in the first quarter of 2017, which held the annual gain for the 12-month period ending in March to just 4.7%, the weakest gain among all four prime metro property indices.

New construction of luxury units, which has been especially elevated in core areas, has begun to impact market fundamentals and may be contributing to weaker pricing in this segment of the multifamily market.   

Multifamily and commerical index report from CoStar

Overall commercial and multifamily in the West region

The West region overall was boosted by growth in industrial and retail indices.

The West Composite Index advanced 1.9% in the first quarter of 2017 and 8.3% in the 12-month period ending in March 2017. The West Industrial and Retail Indices each advanced by more than 2% in the first quarter and just over 7% for the 12-month period ending in March 2017.

Similar to the Northeast region, the West Multifamily Index fell 1.3% in the first quarter but still was up by 8.7% for the 12-month period ending in March 2017.

Co-star prime multifamily index

The CoStar Commercial Repeat Sale Indices (CCRSI) provides the market's first look at commercial real estate pricing trends through March 2017. Based on 1,104 repeat sale pairs in March 2017 and more than 176,000 repeat sales since 1996, the CCRSI offers the broadest measure of commercial real estate repeat sales activity.

About The CoStar Commercial Repeat-Sale Indices

The CoStar Commercial Repeat-Sale Indices (CCRSI) is the most comprehensive and accurate measure of commercial real estate prices in the United States. In addition to the national Composite Index (presented in both equal-weighted and value-weighted versions), national Investment-Grade Index, and national General Commercial Index, which we report monthly, we report quarterly on 30 sub-indices in the CoStar index family. The sub-indices include breakdowns by property sector (office, industrial, retail, multifamily, hospitality, and land), by region of the country (Northeast, South, Midwest, and West), by transaction size and quality (general commercial, investment-grade), and by market size (composite index of the prime market areas in the country). The CoStar indices are constructed using a repeat sales methodology, widely considered the most accurate measure of price changes for real estate.

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