NAR: Economic softening hits leading commercial real estate index MortgagePress.comNAR, National Associaiton of Realtors, Commercial Leading Indicator for Brokerage Activity, Lawrence Yun, market behavior
The softening of economic conditions in recent months should
impact commercial real estate markets in the months ahead,
according to a forward-looking index for the commercial real estate
sectors published by the National Association of Realtors. The
Commercial Leading Indicator for Brokerage Activity slowed 0.9
percent to an index of 117.9 in the second quarter from a reading
of 119.0 in the first quarter, and is 2.1 percent lower than the
record 120.5 in the second quarter of 2007; NARs track of the index
dates back to 1990.
Lawrence Yun, NAR chief economist, said commercial real estate
activity, as measured by net absorption and the completion of new
commercial buildings, is projected to weaken over the next six to
nine months. "The pace of decline has intensified due to job cuts
and very sluggish economic activity since the beginning of the
year, particularly in those industries requiring commercial
building spaces," he said. "We anticipate the weakest commercial
brokerage activity in nearly three years as a result."
Members of the Society of Industrial and Office Realtors
indicate in their SIOR Commercial Real Estate Index, a separate
attitudinal survey of approximately 600 local market experts, that
they anticipate a lower level of business activity in the upcoming
Analysis of the SIOR index implies that office and industrial
market conditions are excellent for tenants and purchasers, but
significantly less favorable for landlords and sellers.
NARs commercial leading indicator is a tool to assess market
behavior in the major commercial real estate sectors. That index
incorporates 13 variables that reflect future commercial real
estate activity, weighted appropriately to produce a single
indicator of future market performance, and is designed to provide
early signals of turning points between expansions and slowdowns in
commercial real estate.
The 13 series in the index are industrial production, the NAREIT
(National Association of Real Estate Investment Trust) price index,
NCREIF (National Council of Real Estate Investment Fiduciaries)
total return, personal income minus transfer payments, jobs in
financial activities, jobs in professional business service, jobs
in temporary help, jobs in retail trade, jobs in wholesale trade,
initial claims for unemployment insurance, manufacturers durable
goods shipment, wholesale merchant sales, and retail sales and food
For more information, visit www.nar.org.