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User:Dulac1984/sandbox/U.S. Commercial Property Price Index

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U.S. Commercial Property Price Index

The U.S. Commercial Real Estate Price Index ("USCPPI") monitors the relative changes to 24 inputs that reflect changing conditions in numerous sectors of the US Real Estate Investment Trust (REIT) markets and commercial property price indices. The USCPPI is a sub-index of the US Commercial Real Estate Index and is released weekly by CRE Demographics, LLC.All of the inputs are in the form of REIT Indices and Commercial Property transaction indices from publicly released data[1][2][3]. These sources are calculated in a proprietary fashion by CRE Demographics, LLC on a weekly basis to create the USCPPI. The data from the public sources is released at varying intervals. The sources of inputs release data daily, monthly or quarterly. All data is calculated as it is made publicly available on a "latest available" basis. The index features inputs from 10 property sectors and 161 publicly traded REITS that represent a total value of $864.8 billion as of the end of May 2015. A table listing a summary of the industry constituents is listed below.

Property Category Number of Indices Represented Number of Equity REITs Represented
All Property/Diversified 5 36
Retail 3 35
Office 3 23
Industrial 3 8
Lodging/Resorts 3 21
Healthcare 2 16
Residential - Apartments 1 19
Residential - Manufactured Homes 1 3
Self-Storage 1 5
Infrastructure 1 6
Timber 1 5
Farmland 1 0

The Index Concept

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An Index[4] is a useful tool for synthesizing a large amount of data inputs into a single number that can be included in a time series for analysis. The U.S. Commercial Property Price Index synthesizes 24 data points from publicly released data and has an inception date of December 31, 2000. The USCPPI is a sub-index that is a contributed component of the US Commercial Real Estate Index. The change in commercial real estate prices is a prime economic driver of the commercial real estate market.

An index can have an arbitrary starting point and an arbitrary starting value. The USCPPI has a starting value of 100 and is expressed in values rounded to two decimal points. The starting date was strategically selected as of the end of 2000 due to the timing of economic cycles.[5] In the graph below from the Federal Reserve Bank of St. Louis,[6] the start and end of the two most recent economic cycles are highlighted with grey shading.

 
Recessions 2000-2015 (Federal Reserve Bank of St. Louis)

The purpose of choosing to start the index at the end of 2000 was due to the fact that this stating point is very close to the peak of an economic cycle prior to the recession that occurred during the eight month period spanning March 2001 through November of 2001[7]. Also, due to the length of the datasets supporting the USCPPI, the effect of two full economic cycles can be observed.

The USCPPI is designed to reflect change in the inputs since the inception of the index. All of the inputs are positively correlated to the index which reflects the overall change to the inputs since the inception date of December 31, 2000.

Index History

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A graph of historical index values spanning the period covering December 2000 through June 2015 is displayed below.

 
U.S. Commercial Property Price Index

The US Commercial Real Estate Index and Its Components

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As mentioned earlier, the U.S. Employment Index is a member of a family of sub-indices that comprise the US Commercial Real Estate Index. In addition to the USCPPI, the other sub-indices include the following:

  • U.S. Employment Index
  • U.S. Credit Index
  • U.S. Consumer Confidence Index
  • U.S. Housing Index
  • U.S. Inflation Index
  • U.S. Income Index
  • U.S. Retail Index

References

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  1. ^ NAREIT - National Association of Real Estate Investment Trusts - REIT Sector Indices which are published daily at https://www.reit.com/data-research/reit-indexes/real-time-index-returns.
  2. ^ NCREIF - National Council of Real Estate Investment Fiduciaries - https://www.ncreif.org/property-index-returns.aspx. These are published on a quarterly basis.
  3. ^ Real Capital Analytics - Commercial Property Price Indices updated monthly at https://www.rcanalytics.com/Public/rca_cppi.aspx.
  4. ^ "A statistical measure of change in an economy or a securities market." - Investopedia - http://www.investopedia.com/terms/i/index.asp
  5. ^ Wikipedia - Business Cycle - https://en.wikipedia.org/wiki/Business_cycle
  6. ^ https://research.stlouisfed.org/fred2/series/RECPROUSM156N
  7. ^ Refer to the included graph above to observe the recent history of economic cycles.
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Category:Real estate indices Category:Commercial real estate Category:Real estate Category:Economic indicators

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