Commercial Real Estate Index Levels Out in 3Q
The Commercial Leading Indicator for Brokerage Activity slipped 0.1% in the third quarter from a record reading in the second quarter, but remains 0.7% higher than the third quarter of 2006.
Lawrence Yun, NAR chief economist, said momentum in the commercial market appears to be leveling at a high plateau. “Commercial real estate has been performing quite well over the past few years and the flattening index means net absorption of space in the industrial and office sectors is likely to contract modestly or hold even over the next six to nine months,” he said. “This trend is consistent with anticipated slower economic expansion in upcoming quarters.”
There should be no measurable change in net absorption in the office and industrial sectors in the first quarter of 2008, and no measurable change in newly completed commercial construction activity.
The level of the commercial leading indicator also implies that commercial real estate practitioners could expect leasing and sales activity in the first quarter of next year to be about 0.7% higher than the first quarter of 2007.
The commercial leading indicator is a tool to assess market behavior in the major commercial real estate sectors. The 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.