According to the National Association of Realtors, the Commercial Leading Indicator for Brokerage Activity, a forward-looking index for the commercial real estate market rose slightly to the highest level on record but the rate of growth has decelerated over the past year in the first quarter. NAR's track of the index dates back to 1990, and The Commercial Leading Indicator for Brokerage Activity increased 0.2 percent to an index of 120.3 in the first quarter from a reading of 120.1 in the fourth quarter, and is 0.8 percent higher than the first quarter of 2006 when it stood at 119.3. With slightly higher completions of overall office, warehouse, retail and lodging structures, the small net rise in NAR's index means net absorption of space in the industrial and office sectors should be fairly steady over the next six to nine months.
According to the National Association of Realtors, the Commercial Leading Indicator for Brokerage Activity, a forward-looking index for the commercial real estate market rose slightly to the highest level on record but the rate of growth has decelerated over the past year in the first quarter. NAR's track of the index dates back to 1990, and The Commercial Leading Indicator for Brokerage Activity increased 0.2 percent to an index of 120.3 in the first quarter from a reading of 120.1 in the fourth quarter, and is 0.8 percent higher than the first quarter of 2006 when it stood at 119.3. With slightly higher completions of overall office, warehouse, retail and lodging structures, the small net rise in NAR's index means net absorption of space in the industrial and office sectors should be fairly steady over the next six to nine months.
Compared with $323 billion of new construction recorded in the first quarter of this year, net absorption in the office and industrial sectors in the third quarter of 2007 is expected to be 10 million to 20 million square feet, with about $335 billion to $345 billion in new completed commercial construction activity. 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. Commercial real estate practitioners can anticipate leasing and sales activity in the third quarter of this year to be approximately 0.8 percent higher than the third quarter of 2006. The commercial leading indicator is a tool to assess market behavior in the major commercial real estate sectors.
The 13 series in the index includes:
industrial production
the REIT (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
Retail sales and food service.
Although individual indicators sometimes move in opposite directions, together they offer a better indication of future market activity. NAR reviewed a wide variety of indicators, examined the relationships of indicators that demonstrated a historical impact on Miami commercial real estate and nationwide, and modeled a forward-looking index based on historic trends. Quarterly data for 13 selected series were reviewed back through the first quarter of 1990. 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. The modeling demonstrated a change in commercial brokerage activity that could be seen two quarters later as measured by net absorption in the industrial and office sectors, and the value of building construction put-in-place on completion of office, warehouse, retail and lodging structures.
Jron Magcale
Miami Beach Condos
Florida Commercial Real Estate