New Market Indicator Forecasts Commercial Brokerage Growth

WASHIINGTON, DC-Commercial brokerage activity over the next six to nine months will be on the upswing, according to the National Association of Realtors Commercial Leading Indicator for Brokerage Activity. “The index increased in nine of the last 10 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,” says NAR chief economist David Lereah. The CLI, which NAR introduced today, is based on 13 market variables–including industrial production, REIT price index, jobs in retail trade, initial claims for unemployment insurance and wholesale merchant sales, to name a few–that impact future commercial real estate. The CLI takes into account the history of these variables for every quarter going back to 1990.

“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,” Lereah adds. For example, from the third quarter to the fourth quarter of 2005, the preliminary value of the CLI increased by .8%; during that same period from in 2004, the number went up 1.6%, and again in 2003, the figure saw an increase, that year by 1.2%. 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 retail, office, warehouse and lodging structures. For previous GlobeSt.com coverage on the launch of the index, click here.