CoStar indexes show large property prices falling as smaller assets rise

Commercial property pricing split along deal size in August, and neither half is pulling the other along. CoStar's value-weighted U.S. Composite Index, which gives greater influence to expensive trades and institutional-grade properties, fell 1.3% on the month and extended its losing streak to five months, while the equal-weighted index, which counts every repeat sale the same and leans on cheaper assets in secondary and tertiary markets, rose 1.4% from July, its first monthly increase since March and a reading just below its all-time high.

The divergence goes deeper than the monthly prints, and over the three months through August the value-weighted measure fell 4% and finished 1.4% below its August 2025 reading, leaving it 19.4% under its July 2022 record, while the equal-weighted index gained 1.2% on the prior quarter and 2.2% over the twelve months ended in August. Large office, apartment, retail and industrial properties in major investment markets kept losing ground, and the smaller assets that dominate the equal-weighted measure posted their first monthly pricing gain since March.

Debt is doing part of the separating work: CoStar reported the Federal Reserve raised its benchmark rate for the first time since 2023, with several policymakers since indicating that more increases may come this year to curb inflation, and those higher borrowing costs fall hardest on large deals that depend on financing. Chad Littell, CoStar's national director of U.S. capital markets analytics, said supply pressure is easing while demand in the general commercial segment improves, describing a market finding better balance after a difficult stretch. Activity ran the other way, with August deal counts and sales volume both slipping from a year earlier even as the trailing twelve months stayed ahead.

The improving balance Littell describes has not reached values across the board, as the equal-weighted benchmark sits within touching distance of a record while the value-weighted measure, built to reflect pricing for larger assets and institutional-grade properties, keeps setting lower prints. Smaller assets are clearing. For allocators and sponsors, the underwriting problem is unambiguous: the large, heavily financed trades in major markets, where prices are still falling, are also where fund and separate-account portfolios carry most of their exposure.

September is the next test in two directions at once: whether the equal-weighted gain survives a second month, and whether the value-weighted index takes a sixth decline.