February 24, 2006—The National Association of Realtors launched a new leading indicator for the commercial real estate market that shows an increase in commercial brokerage activity can be expected over the next six to nine months.
David Lereah, NAR’s chief economist, said the new index shows the broad recovery in commercial real estate markets will continue. “In fact, the index increased in nine of the last ten quarters—this trend implies that commercial activity of net absorption and the completion of new buildings will remain solid through the third quarter of this year.”
The Commercial Leading Indicator for Brokerage Activity is a new tool to assess market behavior in the major commercial real estate sectors. “The index incorporates 13 variables that reflect future commercial real estate activity,” Lereah said. “Our methodology follows a well-known process of looking at changes in individual indicators and then weighting them appropriately in a process that results in a single indicator of future market activity.”
The index is designed to provide early signals of turning points between expansions and slowdowns in commercial real estate. 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.
The National Association of Realtors represents more than 1.2 million members involved in all aspects of the residential and commercial real estate industries. For more information, visit the Web site.
