Commercial property price changes in the first quarter showed a U.S. market split between low- and high-priced deals, with the least expensive sales faring better.
CoStar Group’s commercial repeat-sale value-weighted index, reflecting big-dollar transactions in large markets, fell half a percentage point in the quarter from the previous quarter. In contrast, low-priced transactions in small markets, tracked by an equal-weighted index, moved up 2.6% quarter to quarter for the first increase after three consecutive quarterly price declines.
The movement extends the monthly trend of low-priced deal prices rising, according to the April CoStar Commercial Repeat-Sale Indices that monitor when a previously sold property trades hands again in a process called a repeat sale.
Lower-priced property transactions in smaller markets and tracked by the equal-weighted index, fared better, moving up 2.6% quarter to quarter. This continues the trend from last month.
The value-weighted index showed significant divergence by property type. The decline was led by office property, a real estate type that furthered its pattern of quarter-over-quarter drops in five of the past six quarters. It sank 2.5% from the fourth quarter, while office prices were down 9.2% on an annual basis.
However, office property pricing trends showed signs of improvement, according to Chad Littell, national director of U.S. capital markets analytics for CoStar and author of the CCRSI report.
Annual office prices turned positive in the western and northeast United States and in prime metropolitan areas including Boston; Los Angeles; New York; San Francisco; Seattle; Washington, D.C.; and Orange County, California, according to the CCRSI report.
“Office prices are trending positively in both the smaller-dollar and larger-dollar priced property transactions,” Littell said in a statement. “Equal-weighted office repeat sale prices turned positive year over year, while the losses at the value-weighted end decelerated to 9% year over year from -29% year over year from 2023-2024.”
Value-weighted industrial property prices fell 1% in the first quarter from the fourth quarter but were still 2.5% higher than a year earlier, Littell noted. Multifamily and retail prices were up 1.1% quarterly, in line with their year-over-year price movement.
Small-market office price growth
Office property prices in the equal-weighted index fueled the overall rise in small U.S. markets, climbing 1.9% over the previous quarter, the opposite of what happened in the first quarter's large-dollar deals. Office prices in this equal-weighted index were up 0.5% over the prior year.
The big loser in the equal-weighted index were multifamily prices, which fell 2.1% quarter to quarter. The annual price decline accelerated to 4.7% for the 12 months ended in March.
“The equal-weight multifamily rate of decline ticked up, but as is often the case, it could easily be revised lower in the next quarter-end CCRSI report,” Littell said.
Industrial prices in the equal-weighted index fell 1.1% quarter over quarter but were up 2.9% annually.
Retail prices notched 0.3% higher over the fourth quarter and finished up 1.9% on a yearly basis.