Post mortems don’t often sound like a lot of fun, but when looking at the results of commercial real estate investing in 2015, almost everyone got good news. CoStar Commercial Repeat-Sale Indices (CCRSI) documented the strong recovery in commercial real estate and showed which property types and regions recovered best.
CCRSI’s U. S. Composite Index looks at the two broadest measures of commercial real estate pricing, and the report showed that the demand for core property assets was especially strong in 2015. The value-weighted index rose 12.6% for the year, which brought it to an all-time high of 19.1%.
The end of the year remained consistent with the trend. There was a spike in the final month as investors tried to get their transactions they had been working on closed before then year-end. There was a composite pair volume of $18 billion which is the highest monthly total ever, and pushed the 2015 volume up to $128.3 billion. This was an increase of 26.2% from 2014, which at the time was a record year.
Investors even left some of the safer investments as they looked for higher returns. The result of moving into the higher risk markets moved those non-core markets and non-core property types—lower value properties, the equal weighted U.S. Composite Index also saw its numbers rise in 2015. This index increased 12.6% in 2015; not a new high, but within 3.4% of equaling the previous high.
In evaluating the quarterly indices of the six major property types, there were double digit gains in 2015. All four of the U.S. regional indices also saw a double digit gain during the year. The Northeast multifamily index was the best performing regional property in 2015 closing 44% ahead of its previous high in 2007. The West multifamily offerings and West office indices also saw strong growth of 1.8% and 13.9% respectively. The South and Midwest saw their indices increase by 12% and 10% respectively.
Overall, the Multifamily Index showed the strongest annual rate of increase and it is the only index to surpass its prerecession high. Commercial real estate investing is still the place for investors to see their money grow in 2016.