U.S. commercial property prices were mixed in February, with the amounts in high-dollar deals falling as those in the low-dollar range rose.
Tenant occupancy drove the swings in value, according to the latest monthly CoStar Commercial Repeat-Sale Indices. It tracks when a previously sold property trades hands again in a process called a repeat sale.
The net gain or loss of occupied space, known as absorption, is also playing out differently between premier, investment-grade properties and the rest of the commercial real estate market. Occupancy is falling in the high quality and more expensive properties often bought by institutional investors and increasing in the general category that makes up everything else, according to the latest CCRSI report.
The CCRSI value-weighted U.S. composite index is more heavily influenced by high-value trades and fell 1.3% in February from the prior month. Meanwhile, the equal-weighted U.S. composite index, which reflects the more numerous but low-priced property sales, rose 1.1%.
In the first three months of 2025, “tenants are set to have emptied more space than they leased year over year for the first time in more than 15 years, and tepid space demand is most evident in the investment-grade segment,” according to Chad Littell, national director of U.S. capital markets analytics for CoStar Group and author of the CCRSI report.
The first quarter is expected to be the most negative quarter on that basis since the third quarter of 2009, he added.
Total net absorption for office, retail, and industrial space combined is projected to turn negative by 800,000 square feet for the 12 months ended in March. That is a notable decline from the same 12 months a year earlier, when the market absorbed 26.9 million square feet.
The investment-grade segment is expected to post a negative net absorption of 4.5 million square feet for the 12 months ended in March, according to the CCRSI report. Meanwhile, the general commercial segment is expected to post 3.7 million square feet of positive net absorption in that same period.
“That is a change from late 2021 and early 2022, when each of segments of the market was posting more than 200 million square feet of positive 12-month net absorption,” Littell said.
Buyers seem to be paying attention to the difference in price growth between the two indices recently. In six of the past 24 months, the general commercial dollar volume of repeat sales has matched or exceeded the investment-grade volume, according to the CCRSI report. That did not happen at all between late 2009 and the end of 2022.
Over the past five years, the value-weighted index is only 8% higher than in February 2020, CCRSI data shows. It has not kept up with the growth in the Consumer Price Index, which was 23% higher in February than in February 2020. However, the equal-weighted index was 33% higher in February than in February 2020.
The latest CCRSI report was based on 1,101 repeat-sale pairs in February and 320,748 repeat sales since 1996.