Real Estate Central

WASHINGTON, May 21 /PRNewswire-USNewswire/ — Although fundamentals are
sound, activity in commercial real estate markets is expected to ease in
the months ahead, according to a forward-looking index for the commercial
real estate sectors published by the National Association of Realtors(R).

The Commercial Leading Indicator for Brokerage Activity(1) edged down
0.7 percent to an index of 119.0 in the first quarter from a downwardly
revised reading of 119.9 in the fourth quarter, and is 0.8 percent below
the first quarter of 2007 when it stood at 120.0.

This is the third consecutive quarterly dip since reaching a record of
120.5 in the second quarter of 2007. Before that, the index showed
generally positive expansion from the middle of 2003; NAR’s track of the
index dates back to 1990.

Lawrence Yun, NAR chief economist, expects somewhat diminished business
opportunities for commercial real estate practitioners in the months ahead.
“The moderate erosion in the index suggests that commercial activity, as
measured by net absorption and the completion of new commercial buildings,
will be positive but somewhat weaker over the next six to nine months.
Private nonresidential investment in structures is likely to subtract
one-third to one-half percentage point off GDP growth,” he said. “Along
with the impact of the credit crunch, a weakening in leasing and building
sales activity should come as no surprise because commercial real estate
follows changes in overall economic activity.”

The quarterly decline results from falling employment in the sectors
requiring office space, rising first-time unemployment claims, a lower rate
of return as measured by NCREIF (National Council of Real Estate Investment
Fiduciaries), and a falling NAREIT (National Association of Real Estate
Investment Trust) price index. In addition, there was a modest decline in
industrial production.

Realtor(R) members who specialize in office and industrial properties
indicate in a separate attitudinal survey(2) that they anticipate a much
lower level of business activity in the upcoming quarters.

“The job market is weak, but not recessionary,” Yun said. “There are
large regional variations, with job growth in the South, while overall
professional business service jobs are in the process of a long-term
expansion.

“The U.S. is the world leader in the knowledge-based industry, and
trade exports are solid - combined, these are solid underlying fundamentals
for positive rent growth and net absorption in the commercial real estate
market.”

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.

The 13 series in the index are industrial production, the NAREIT price
index, NCREIF 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 service.

More than 80,000 NAR members offer commercial services, and 60,000 of
those are currently members of the Realtors(R) Commercial Alliance, NAR’s
commercial division.

The National Association of Realtors(R), “The Voice for Real Estate,”
is America’s largest trade association, representing 1.2 million members
involved in all aspects of the residential and commercial real estate
industries.

(1)The index was revised minimally back through 2005 due to a
comprehensive revision in industrial production data by the U.S. Census
Bureau.

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.
Although individual indicators sometimes move in opposite directions,
together they offer a better indication of future market activity.

Quarterly data for 13 selected series were reviewed back through the
first quarter of 1990. 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 completion of new
commercial buildings as measured by the value of building construction
put-in-place of office, warehouse, retail and lodging structures. 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.

(2)The SIOR Commercial Real Estate Index is a diffusion index based on
a survey of approximately 600 members of the Society of Industrial and
Office Realtors(R) conducted by NAR Research. For more information, contact
Richard Hollander, SIOR, at 202/449-8200.

The next commercial real estate market report and forecast is scheduled
for release on June 18, and the next commercial leading indicator index
will be released August 20.

Information about NAR is available at http://www.realtor.org. This and other
news releases are posted in the News Media section. Statistical data,
tables and surveys also may be found by clicking on Research.



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Source: Real Estate Newswire