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CRE's Expansion Slows in Q2

WASHINGTON, DC-Expansion in net absorption and commercial construction continues, but at a slower pace.

By Erika Morphy | Updated on August 21, 2006

(For more retail coverage, click GlobeSt.com/RETAIL.)

WASHINGTON, DC-There is good news and bad news in the National Association of Realtors’ latest Commercial Leading Indicator for Brokerage Activity, released today. The good news is that the commercial real estate activity continues to expand. The bad news is that its rate of expansion has declined by half since last quarter.

“This quarter’s results are a little less positive, compared to our previous reports,” Lawrence Yun, senior economist at NAR tells GlobeSt.com. In Q2, the Commercial Leading Indicator for Brokerage Activity was at an index of 119.4, up 0.4% from a reading of 118.9 in the first quarter. However, Yun points out, Q1′s increase was 0.8%. “Last quarter there was deceleration, but this quarter we see that the deceleration is faster,” he says. Whether CRE activity actually contracts, Yun says, will depend on the overall direction of the economy. The current slowdown in CRE activity, he notes, is in large part due a response to higher interest rates and high oil prices. “The economy’s growth is not exactly robust but it is still respectable,” he says. “Should there be an actual contraction in economic activity that will naturally affect commercial real estate activity.”

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