S&P launches US commercial real estate index

Standard & Poor's and the California real estate and investment research group GRA have launched the S&P/GRA commercial real estate index (SPCREX), which, unlike other US indexes, will be based on closed commercial transactions only.

This means that any appraisals, just listed, sales pending or in escrow transactions will be excluded from the index and investors will be able to account for actual movements in commercial real estate prices in the US. The index series will include 10 commercial real estate indexes: a national composite index, five geographic regions (desert/mountain West, mid-Atlantic South, mid-West, north-east and Pacific West) and four national property sectors (apartments, office, retail and warehouse).

The SPCREX will be calculated monthly, using a three-month moving average. Commercial real estate sales transactions are aggregated into rolling three-month periods for the calculation of constant quality mean prices per square foot. Commercial stock weights are subsequently applied to calculate each index. In each reporting period, the index is based on three months of closed transactions, and the typical lag from transaction close to data reporting is three months.

The Chicago Mercantile Exchange has announced it will trade futures and options on futures on the indexes in the next 3–9 months. Its earlier plans to use GRA property indexes were suspended after the company was taken over by brokerage Charles Schwab in January this year.