Soft economy slows national commercial property index

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 in the first quarter, and is 2.1 percent lower than the record 120.5 in the second quarter of 2007; NAR’s track of the index dates back to 1990.

For this index, NAR reviewed a wide variety of indicators, examined the relationships of indicators that demonstrated a historical impact on commercial real estate, and modeled a forward-looking index based on historic trends.

An index of 100 is defined as the level of commercial real estate market activity during the first quarter of 1990, the first period to be analyzed.

NAR Chief Economist Lawrence Yun said in a news release that commercial real estate activity, as measured by net absorption and the completion of new commercial buildings, is projected to weaken during 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.”

The 13 factors considered in the index include industrial production, National Association of Real Estate Investment Trust price index, jobs in financial activities, professional business services, initial claims for unemployment insurance, manufacturers’ durable goods shipment, wholesale merchant sales, and retail sales and food service.

A separate survey by the Society of Industrial and Office Realtors showed that SIOR members also anticipate a slowdown in business activity in upcoming quarters.

Analysis of the SIOR index, which included input from roughly 600 market experts, implies that office and industrial market conditions are excellent for tenants and purchasers, but significantly less favorable for landlords and sellers.[[In-content Ad]]