August 23, 2006—The Commercial Leading Indicator for Brokerage Activity, a leading indicator for the commercial real estate market, shows an improvement in commercial sectors will continue into 2007, according to the National Association of Realtors (NAR).
During the second quarter, the Commercial Leading Indicator for Brokerage Activity was at an index of 119.4, up 0.4 percent from a reading of 118.9 in the first quarter. The index is 2.5 percent above the second quarter of 2005 when it stood at 116.5. The second quarter index was the fifth straight quarter of growth.
David Lereah, NAR’s chief economist, said the improvement is long-term. “Our commercial leading indicator has risen in 11 out of the last 12 quarters, meaning the recovery in commercial real estate will be sustained well into 2007,” Lereah said.
“However, we are seeing a deceleration in the rate of growth – apparently in response to higher oil prices and interest rates – so the expansion in net absorption and commercial construction should continue, but at a slower pace.”
NAR’s 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 National Association of Realtors is America’s largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries. For more information, see the Web site.
