CRE Prices Fall in January but Market Shows Signs of Strength

Repeat sales in the commercial real estate market in January came to just one-third of their December volume, according to a ""CoStar's"":http://www.costar.com/ monthly Commercial Repeat Sale Indices. However, the Washington-based analytics and marketing firm for the commercial real estate industry said this drop was to be expected and pointed to several positive signs in the sector.

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January's repeat sales volume was $3.1 billion, about a third of the previous month's volume. The decline was ""expected as the flurry of year-end 2012 deal making subsided,"" CoStar said in its report.

However, general sentiment in the commercial sector remains somewhat positive, according to CoStar, which noted that fewer discouraged sellers withdrew their properties from the market in January.

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The number of properties taken off the market by sellers in January was 12.1 percent fewer than the number recorded in January 2012.

Perhaps contributing to this decline, the gap between sellers' initial asking prices and final sales prices is narrowing, and time on market is decreasing.

The price gap reduced by about 2.5 percent from January 2012 to January 2013, and time on market has decreased 2.7 percent from its most recent high in the second quarter of 2012.

January's sale-to-asking-price ratio stood at 86.9 percent.

CoStar also observes prices within the commercial repeat-sale sector and found mixed results in January.

The firm's Value-Weighted Composite Index revealed a 0.7 percent increase in January, while the Equal-Weighted Composite Index fell 2.9 percent over the month.

Both indexes remain up over the year with the Value-Weighted index posting a 4.8 percent annual increase and the Equal-Weighted index posting a 5.5 percent annual increase.

Prices for investment-grade properties, when weighted for value, fell 1.7 percent in January. However, ""[a] similar seasonal adjustment in pricing levels has been observed in the first months of the past several years,"" CoStar said.

Also, despite the monthly loss, investment-grade property prices are about 16 percent above their 2009 low.