The index is 2.7% higher than the first quarter of 2005 when it stood at 115.7. The first quarter index marked four straight quarters of growth, with improvement seen in 10 of the last 11 quarters. David Lereah, NAR's chief economist, tells GlobeSt.com that such modest increases are good for the commercial sector. "You don't want overbuilding as we have had in the past."
Net absorption in the office and industrial sectors in the fourth quarter is projected to be 135 to 155 million sf. About $284.5 billion in additional commercial construction is expected in the fourth quarter, an increase of $17.4 billion above the $267.1 billion recorded in the first quarter.
Continuing an ongoing trend, the Washington, DC-area is among the leading cities for office growth, Lereah says. "For the last year now, Washington, DC has been either on the top or very close to the top of the lists for office." He attributes it to the city's government base and robust technology sector.
Elsewhere, he said, port cities on the West Coast, such as Long Beach, are doing very well for obvious reasons--as trade increases so does the need for warehousing facilities. Nearby distribution centers are also booming, he adds. Las Vegas, for instance, has become a major distribution center and is benefiting from the West Coast ports' growth as shippers truck the goods to Las Vegas for warehousing.
"We are looking at retail with some caution though," Lereah says. "Right now the sector looks fine, but if there is going to be some slowing in the economy it will come from the consumer, not the business sector." Regions in which there is overbuilding in this sector could suffer, he concludes.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
